UPDATE 3-Temasek looks for investments in Mexico, Brazil

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By Saeed Azhar

SINGAPORE, May 28 (Reuters) - Singapore sovereign fund Temasek [TEM.UL] said on Wednesday it is looking for investments in Brazil and Mexico to tap growth in Latin America's emerging economies and booming demand for commodities.

The move underscores the state investment firm's recent focus outside its core Asian market, which excluding Japan accounted for 78 percent of its S$164 billion ($120.5 billion) portfolio last year.

Temasek made high profile investments in Western banks such as Merrill Lynch MER.N last year as lenders shored up balance sheets hammered by exposure to U.S. subprime mortgages and other risky credit investments.

The state firm said it has hired Lorenzo Gonzalez Bosco, former chief executive of Barclays Bank (BARC.L) in Mexico, as its new managing director for investment in that country. It will relocate Alan Thompson, its managing director for investment in Latin America, to Sao Paulo, Brazil later this year.

Chua Hak Bin, an investment strategist at Deutsche's private bank, said the new focus on Latin America suggests Temasek wants to invest outside its key market into a region rich in resources.

"Latin America is benefiting from the commodity boom, and would be one natural play if you want to diversify," he said. "Temasek investments in Latin America are also less sensitive politically."

But Leslie Phang, head of investments at Schroders Private Clients, said investors coming late to the party in Latin America and Middle East also face investment risks if the oil and commodity boom reverses.

"The odds for boom-bust oil prices have risen significantly in recent months, hence presenting a risk for late stage allocation into resource-rich countries."

Some other sovereign funds, which are less exposed to emerging markets than Temasek, are also looking beyond the developed world where a credit crisis has reduced returns.

Norway, which has a $400 billion oil fund, recently said it wants to put more money into emerging markets.

Emerging markets guru Mark Mobius told Reuters last month that Brazil was one of his favourite markets. It was the largest holding in the firm's Templeton Emerging Markets fund at the end of February.

Temasek, headed by Ho Ching, the wife of Singapore Prime Minister Lee Hsien Loong, has faced some political and regulatory obstacles for investments in neighbouring countries such as Thailand and Indonesia.

Earlier this month, an Indonesian court ordered Temasek and its affiliates to sell one of its two Indonesian telecoms units, upholding an earlier ruling by the country's anti-trust body.

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