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Singapore’s Temasek TEM.UL sold its 3 percent stake in Bank of America in the first quarter of this year, taking a loss of around $3 billion in the process, as the state investor refocuses on emerging markets.

Temasek invested in Merrill Lynch and other global banks during the early phase of the credit crisis but, like most sovereign wealth funds, was burned by losses as the crisis deepened.

Temasek ended up with a stake in Bank of America when the U.S. bank bought Merrill in January.

But the U.S-centric Bank of America may not have been the first choice of investment for Temasek, given the state investor focuses on global companies that aim to grow in Asia, sources familiar with Temasek’s thinking told Reuters.

Analysts said Bank of America did not offer the global banking franchise that prompted Temasek and other sovereign funds to buy into Merrill and other Western banks.

Singapore’s bigger sovereign wealth fund, GIC, also invested in Citigroup and UBS.

“Bank of America is no longer a global franchise. It’s pulled out from a lot of its overseas operations,” said Mike Kerley, a London-based fund manager at Henderson Global Investors low interest personal loan.

He added the U.S. Federal Reserve’s recent ’stress tests’ on banks showed BofA needed to raise new capital, which would dilute the holdings of existing investors such as Korea Investment Corp.

Bank of America’s shares in Frankfurt were up 1 percent in early European trade on Friday.

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Temasek has also recently become more aggressive in the Asian market and is eyeing investments in Latin America and Russia.

The cash from the BofA stake sale partly allowed Temasek to subscribe to rights issues of Asia-focused Standard Chartered, Singapore’s DBS and Indonesia’s Bank Danamon.

This week it bought more shares in China Construction Bank from Bank of America.

“It seems they feel the China growth story is better than the ‘green shoots’ of recovery in the U.S.,” said Song Seng Wun, chief executive of CIMB Research in Singapore.

He said Temasek probably sold its BofA holdings to cap its exposure to financial stocks, which at the end of March 2008 was 40 percent of its portfolio. 

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