According to Yahoo!News:

SINGAPORE (Reuters) – Singapore wealth fund Temasek warned of further contagion from the global credit crisis after it doubled its full-year profit by selling billions of dollars of assets.

The fund, which poured more than $5 billion into Merrill Lynch in December, said it saw value in the banking industry, despite the U.S. subprime disaster that has forced banks to write off more than $500 billion.

“The fallout of the credit crisis will continue to dampen the global economy over the next 24 months, with sharply escalated oil and food prices beginning to test inflation expectations,” Chairman S. Dhanabalan said in the firm’s annual report.

But Temasek sees opportunities in financials and said it would not cap its investments in that sector, which grew to 40 percent of its portfolio in the year to end-March from 38 percent previously.

“The financial service industry is one we believe in,” Manish Kejriwal, Temasek’s senior managing director for investment, International and India, told reporters at its annual briefing on Tuesday. “It’s a proxy to the economic growth.”

Read the full article at Yahoo!News

- This is a totally super high risk investment portfolio that Temasek is venturing into the “unknown”.

These fund managers or advisers may or may not know what is going on on the energy crisis that propagated into property markets. The talks about dropping property prices started many years ago when oil prices starts to goes up since 2002.

Many mortgages sub-prime loans are invented for the property investors to “flip” their properties in a short span of time at low starting interest rates. This allow investors to cash in on the lower interest rates on the first few years of loan and manage to sell off at a profit before the higher interest rates kicks in.

When the cost of living went up due to higher oil prices that spike transportation cost, suburbs living suddenly loses economic value and collapse in prices crashing the property market in the thousands.

Property owners & investors are caught in the high interest mortgage loan and low selling prices of their properties. When these people declare bankruptcies, the bank will foreclose the properties to recover as much as possible. Loss is inevitable to the banks now and had to write off these bad loans.

Banks tried to sell off these sub-prime loans to many other banks to gain liquidity to “loan” more money out hence affecting other major banks as well.

The ripple effects had spread across the world financial industry causing many banks to lose billions or trillions of dollars.

What Temasek are betting on is the revival of the property market in United States that may be pretty tough unless the cost of oil goes down substantially.

This may means Temasek is investing blindly without knowledge of oil prices possible future, with talks about world oil supply peaking in production and ever increasing demand may make Temasek in the losing end of the “roulette table”.

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