HONG KONG/SINGAPORE: Singapore's state investor Temasek is in talks with a unit of Bank of China (BOC) to launch a $1 billion to $2 billion investment fund focusing on fast-growing infrastructure projects across the mainland, sources said yesterday.

Talks between Singapore's sovereign wealth fund and BOC International, the investment banking arm of BOC, were in the early stages but both had agreed on the general idea of the fund plan, said the sources, who had direct knowledge of the plan.

"This is an initiative led by BOC International. The two sides are talking," said one of the sources.

Temasek and BOC International aimed to set up a joint venture to manage the fund, which would seek investment opportunities emerging from Beijing's 4 trillion yuan ($585 billion) economic stimulus package launched late last year, the sources said.

The two firms plan to raise between $1 billion and $2 billion in the joint venture although no deal has been inked as they are still working on the legal framework for the partnership, said the sources.

"There are so many ongoing infrastructure projects across the country and the demand for capital to support those projects is huge," said another of the sources.

The sources declined to be identified as negotiations between the two parties are confidential.

Temasek and BOC International both declined to comment.

Beijing revealed its economic stimulus measures late last year to fight the global financial crisis and analysts have said an investment focus for Beijing will be government-backed infrastructure projects such as bridges, airports, ports and railways in major mainland cities.

Beijing encourages banks, insurers and private capital to participate in infrastructure investments. For example, the second-largest life insurer on the mainland, Ping An, has been approved to invest in a Beijing-Shanghai railway project.

Temasek, which sold shares of Bank of America and Barclays, suffering an estimated loss of over $4 billion in the process, is trying to shift its investments to non-financial sectors with focus on Asia.

Temasek has in the past invested in infrastructure firms.

Reuters

(HK Edition 07/10/2009 page3)