Aug. 26 (Bloomberg) -- Temasek Holdings Pte, Singapore's $130 billion sovereign wealth fund, said the global credit crisis will last two more years, drying up investment opportunities and constraining economic growth.

``It's going to be very difficult to predict whether we're in the beginning, the middle or the end,'' Michael Dee, Temasek's senior managing director of international, said in a Bloomberg Television interview. ``It may end sooner, it may go out of the 24-month window, but the other thing I would say is it's not just subprime; it can affect credit cards and other asset classes.''

Temasek led investments in Merrill Lynch & Co. and Barclays Plc as the credit market collapse erased $9 trillion from global stocks in the past year, forcing banks to restore depleted capital. Singapore's Finance Ministry, Temasek's only shareholder, injected S$10 billion in April 2007 to help it expand its portfolio amid a slide in asset values.

Temasek, along with a handful of sovereign wealth funds including those from Dubai and China rose to prominence in the past year as they invested in global banks such as Citigroup Inc. and Morgan Stanley. The Singapore investment company estimates sovereign funds own 2 percent of global stocks and bonds.

No Bottom Yet

``We still haven't seen a bottom yet'' for the credit crisis, said Daphne Roth, Singapore-based head of equity research in Asia at ABN Amro Private Bank, with about $30 billion of Asian assets. ``In that sense, we're quite close to Temasek's view that the problems will stretch into the next year at least.''

Temasek, set up 34 years ago with companies that helped develop industries such as banking and shipbuilding, said today full-year profit doubled to a record as sales of energy and shipping assets countered slowing returns from stocks investments.

Net income rose to S$18.2 billion ($12.8 billion) in the year ended March 31, up from S$9.1 billion, it said in its annual report today. Temasek sold Tuas Power for S$4.24 billion in March and shares in China Cosco Holdings Co., the world's biggest commodities shipping company.

Temasek's portfolio expanded 13 percent to S$185 billion in the year ended March from S$164 billion a year earlier, Chairman S. Dhanabalan said on Aug. 21.

Temasek, led by Chief Executive Officer Ho Ching, 55, more than tripled assets sales to S$17 billion from S$5 billion in the previous year. It also doubled new investments to S$32 billion, reflecting the increase in acquisitions by sovereign wealth funds even as it takes a more cautious approach.

`Range of Outcomes'

``What we want to try and do is to be prepared for a range of outcomes,'' Dee said today.

Banks and securities firms have raised more than $300 billion in the past year after more than $500 billion of writedowns and credit losses caused by the collapse of the U.S. subprime mortgage market, data compiled by Bloomberg show.

About 80 percent of Temasek's portfolio is in publicly traded assets. The company said its return from investments in publicly listed companies slowed to 7 percent from 27 percent in the previous year. The MSCI World Index fell 5.1 percent in the year ended March, after a 13 percent gain the previous year.

Shares in Hong Kong billionaire Li Ka-shing's Hutchison Whampoa Ltd., which invests in ports, phone companies, real estate developments and energy, fell 2 percent while U.S. billionaire Warren Buffett's investment firm Berkshire Hathaway Inc. gained 22 percent in the same period.

Financial Investments

Temasek embarked on an overseas expansion in the past decade to stretch its reach beyond Singapore, where it already controls six of the city state's 10 biggest companies by market value.

Financial services investments, the biggest slice of Temasek's portfolio, made up 40 percent in the year to March, up from 38 percent the previous fiscal year. Temasek is the biggest shareholder in Merrill, Standard Chartered Plc and DBS Group Holdings Ltd., and also owns stakes in India's ICICI Bank and lenders in Indonesia, South Korea and Pakistan as they are ``proxies'' of their economies.

``These are companies that have excellent reputation, outstanding management, and great franchises, and they have been affected through the course of this crisis,'' Dee, 52, said. ``We own them at a level which is very good value for us in the long haul, and ultimately, these will turn out to be very good investments.''

Limited Opportunities

The MSCI World Financials Index declined 24 percent in the year to March 31 as losses at financial firms mounted amid the credit market seizure.

Temasek has invested about $5.9 billion in Merrill since Dec. 24, after the third-biggest U.S. securities firm reported the largest quarterly loss in its 94-year history because of writedowns of mortgage investments and loans.

``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,'' Dhanabalan said in a statement today. ``Opportunities may be limited in such a scenario.''

Merrill shares dropped 24 percent from the time of Temasek's original investment to March 31, the end of the Singapore company's fiscal year.

Barclays shares declined 38 percent since Temasek and China Development Bank announced plans to invest in the bank on July 23, 2007, to the end of March. The two invested about 3.6 billion euros ($5.4 billion) last year for a 5.2 percent stake, and added 4.5 billion pounds ($8.4 billion) in June at about half the price.

Temasek has said it wants a third of investments each in Singapore, in countries that are members of the Organization for Economic Cooperation and Development, and other Asian nations.

Investments in Singapore now make up a third of the portfolio from more than half four years ago, Temasek said. OECD countries account for 23 percent, down from 32 percent in 2004, while investments in Asia make up 41 percent from 16 percent.

To contact the reporter on this story: Jean Chua in Singapore at jchua4@bloomberg.net.

Last Updated: August 26, 2008 07:35 EDT