Singapore's decision to subscribe to a share sale by Chartered Semiconductor Manufacturing Ltd (特許) that most other investors snubbed was a setback in the government's plan to reduce its role in the island's businesses, investors and politicians said.
The unprofitable chipmaker raised S$1.11 billion (US$620 million), helped by state-owned Singapore Technologies Group, which owns 60.5 percent and took up its right to buy 671 million shares for S$1 each.
Even after the purchase, the government's total stake in Chartered is worth about S$400 million less than it was before the sale was announced. Merrill Lynch & Co, the sale manager, was left with as much as a 16 percent stake.
``There needs to be an examination on how public money is spent and also on how the government and its holding companies like Temasek deal with government-linked companies,'' said Inderjit Singh, a member of the ruling party in Parliament, in an e-mailed statement. Temasek Holdings Pte is the government's investment arm.
Investors are increasingly skeptical of the government's plans to cut its involvement in unprofitable businesses.
Other shareholders walked away after Chartered's stock fell below the offer price and doubts rose over when the world's third-largest supplier of custom-made chips can become profitable and catch up with Taiwanese rivals. Chartered traded at 91.5 cents when Singapore trading closed, down from S$1.82 on Aug. 30 before the share sale was announced.
Concerns raised
Decisions at other government units have raised similar concerns. Last month, the government's investment arm offered to buy back shares of a food company held by its unit SembCorp Industries Ltd, which wants to sell the stake to raise about US$150 million to focus on other businesses. SembCorp is Southeast Asia's biggest civil engineering company.
Temasek, which controls stakes in major companies including the island's largest bank, phone company and chipmaker, has seen its companies lose about S$14.4 billion in market value in the third quarter.
Temasek spokeswoman Eva Ho said Singapore Technologies alone decided to subscribe to the Chartered share sale, not the local government of Singapore nor Temasek.
``The Singapore government, Temasek Holdings and Singapore Technologies are separate and distinct entities,'' she said in an e-mailed statement.
"They are not interchangeable.'' Singapore Technologies declined to comment.
In Chartered's case, the stock sale highlights risks involved in Singapore's strategy of picking companies to build into ``global champions,'' while divesting others in a bid to make the island-state more competitive, investors said. Picking the right winner isn't easy, and investors say some recent restructuring efforts by state-owned companies have disappointed.
``Nobody faults the strategy to go global and be more competitive, but the execution has to be improved,'' said Teng Ngiek Lian, who helps manage US$100 million as chief investment officer at Target Asset Management. `
`The issue with Chartered was also that business is bad and investors can't see how it can be a winner like the Taiwanese chipmakers.'' Chartered, which sought cash from its investors for the fourth time in three years, said last month it would miss its fourth-quarter sales target because of weak demand for computer chips.
Taiwan powerhouses
The company needs to invest in new technology to stay competitive with bigger rivals like Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電), investors said. Chartered racked up US$603 million in losses over the past six quarters.
Taiwan Semiconductor and United Microelectronics account for about 62 percent of all custom-built chip sales, compared with 5 percent for Singapore's Chartered Semiconductor, Gartner Inc says. Chartered is worth about a seventh the size of UMC and a 15th of TSMC by market value.
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