Singapore GIC says to subscribe to UBS rights issue

SINGAPORE (Reuters) - The Government of Singapore Investment Corp, one of the world's biggest sovereign wealth funds, will fully subscribe to UBS AG's (UBSN.VX) rights issue as the Swiss bank seeks to repair its battered balance sheet.

A GIC spokeswoman declined to provide the value for the transaction, which will be based on its 0.4 percent holding in UBS common stock, after the May rights issue by Europe's biggest casualty of the U.S. housing crisis.

"It makes sense to invest because it's a huge discount off the market price, and it shows their commitment to UBS and they are it for the long haul," said Chua Hak Bin, an investment strategist at Deutsche's private bank in Singapore.

GIC controls 9.54 percent of the voting rights in UBS after it invested 11 billion Swiss francs ($11 billion) in mandatory convertible notes in UBS in December following the Swiss bank's U.S. housing losses.

UBS launched a rights issue worth 16 billion Swiss francs in May, a third below its then market price, underlining the extent of the bank's troubles after it was forced to write down around $37 billion of assets hit by U.S. subprime mortgage defaults.

Under the rights issue, offered at 21 Swiss francs per share -- a whopping 73 percent below the peak price of UBS shares around one year ago -- UBS said it would issue over 760 million new shares and offer existing shareholders seven new shares for every 20 they hold.

"We will subscribe fully to the new shares for our holdings in the UBS common stock," a GIC spokeswoman said in an emailed statement to Reuters.

Singapore's wealth funds have made high-profile investments in beleaguered Western banks since the start of the credit crisis. The GIC invested $6.88 billion in Citigroup (C.N) in January, and its sister fund Temasek Holdings pumped $5 billion into Merrill Lynch MER.N.

GIC's Chairman Lee Kuan Yew said in April it may invest in more banks in Europe and the United States if it gets the chance, despite a slide in Western banking stocks since the Singapore wealth funds' purchases.

"There are other names you can buy... They should be allotting money back into the Asian market," said a Singapore-based fund manager, who declined to be identified because he was not allowed to comment on individual stocks.

The acquisitions by sovereign wealth funds from Singapore and the Middle East have also drawn criticism from some Western politicians worried the investments are for political gains.

GIC says on its website www.gic.com.sg that it manages well above $100 billion of funds, but some analysts estimate the figure is closer to $300 billion.

Morgan Stanley said in February that GIC was the world's third-largest state fund with $330 billion in assets under management, behind the Abu Dhabi Investment Authority with $875 billion and Norway's Government Pension Fund with $380 billion.

(Additional reporting by Melanie Lee; Editing by Neil Chatterjee/Richard Hubbard)