Although global markets have stabilized at least temporarily over the last couple of weeks, there is no sign of a letup for Temasek, the Singapore sovereign wealth fund that has already chalked up massive paper losses from its exposure to the world’s ailing banks.

Temasek looks likely to have lost its entire S$400m (US$270m) investment in ABC Learning Centres, the recently-collapsed Australian childcare provider, and there are growing concerns that the fund may have to help bail out the Marina Bay Sands casino project in Singapore as owner Las Vegas Sands creaks under a mountain of debt.

If last year, when Temasek built multi-billion dollar stakes in the once mighty Merrill Lynch and the UK banks Barclays and Standard Chartered, was a bad time to be putting money into the financial services sector, then now is not exactly the ideal moment to be pushed into a big investment in Singapore’s nascent casino industry.

Like other investors enticed by the dramatic gains on offer in a late-stage bull market, Temasek - which is run by Ho Ching, the wife of Prime Minister Lee Hsien Loong - appears to have had the canny knack of buying right at the top of the market and then watching its investments slide in value. Even as the first warning signs of serious problems in the banking sector appeared in the first half of last year, Temasek continued to pump money into the financial services industry, which now accounts for 40 percent of its S$185 billion (US$124 billion) portfolio.

This fondness for the financial services sector may stem in part from Temasek management’s closeness to the bulge-bracket investment banks. Despite the humbling of the one-time masters of the universe over the last year, Temasek has continued to recruit senior executives from Wall Street, bringing in Morgan Stanley investment banker Michael Dee in August and Rohit Sipahimalani, another Morgan Stanley banker, last month.

But the rapid demise of ABC Learning, which is Australia’s largest childcare provider, shows that Temasek’s poor investment decisions are not limited to the banking sector. Temasek bought into ABC in May last year at a punchy A$7.30 a share and the stock soon headed south as the outlook for the over-hyped operator deteriorated. The shares were suspended at 54 cents each in August but equity investors are likely to lose everything after ABC went into administration because of mounting financial problems.

If Temasek were to bail out Marina Bay Sands, it certainly would not be buying at the top of the market. But it would be an investment decision driven less by financial prudence and more by the need for the Singaporean government to ensure that its casino experiment doesn’t fail.

Nervous about the Singapore economy’s narrow reliance on shipping and financial services, the socially-conservative government took the controversial step of legalizing casinos in 2005, prompting an unprecedented public debate in the usually acquiescent city state.

Having staked its reputation on partnerships with the likes of Las Vegas Sands and Malaysia’s Genting (which won the licenses to operate the two casino resorts), the government is desperate not to let the experiment fail. So Las Vegas Sands’ indication last week that it will not be able to meet the requirements of some of its loans unless it cuts spending will have sent shockwaves running through the corridors of power in Singapore.

While Sheldon Adelson, the tycoon behind Las Vegas Sands, has personally confirmed his commitment to completing the Marina Bay Sands resort, analysts now believe it is increasingly likely that the government may have to step in at some stage, probably in the guise of Temasek or one of its linked companies. Adelson’s gaming empire is such bad shape that Sands has had to stop construction in Macau of its huge Cotai Strip development opposite its Venetian complex which is intended to house various 5-star hotels as well as a casino. The Macau government has said — according to the Financial Times- that it won’t allow any casinos to close and will take them over if necessary. However it seems that commitment does not extend to helping out partly finished projects.

“If Las Vegas Sands cannot cough up its share of equity, the Singapore government is likely to step in,” said Donald Chua, an analyst at local stock broking firm CIMB-GK, in a research note. “A viable option would be a 49:51 joint venture between the Government and CapitaLand, with CapitaLand taking a controlling stake.”

Singapore-based brokerage UOB Kay Hian added that the syndicate of banks providing the S$5.4bn ($3.6bn) debt facility for the construction of Marina Bay Sands could seek a new investor, hinting that they could turn to 40pc-Temasek-owned CapitaLand, a property group that was involved in unsuccessful bids for both casino licenses.

CapitaLand has insisted that it has not held any talks with Las Vegas Sands but, at the same time, it said that it was “strategically watching the situation and studying opportunities related to distressed companies or assets.” And, despite Las Vegas Sands’ assurances, the Singapore Tourist Board stressed this week that it has a number of options should the project fail, including taking possession of the development site.

While Temasek or CapitaLand may be able to pick up a stake in the Marina Bay casino on the cheap, gambling is one strategic industry that the government did not want end up owning. The government originally opted for international gaming companies like Las Vegas Sands and Genting because it thought they had the experience and clout to build world-class casino resorts that would attract gamblers from around the globe. While the Marina Bay Sands is unlikely to be re-branded as the Temasek Casino, whatever happens, gaming analysts doubt whether a government-backed resort would have the same draw.

With the impact of the financial crisis only just starting to hit the global economy, there are likely to be more disappointments ahead for Temasek in the coming months. But Temasek is not required to disclose regular financial results, as it has been given the status of an exempt private company despite being owned by the Ministry of Finance. So the people of Singapore, whose money Temasek is ultimately controlling, will probably have to wait until summer, when the fund is expected to release its next annual review, to find out exactly how badly it has fared over the past year.

Temasek also leaped heavily into one of China’s highest profile, and perhaps more vulnerable, property developers, Country Garden. When it went public in Hong Kong in April 2007, Country Garden was the second largest IPO in Hong Kong history, with Temasek joining local tycoons Lee Shau Kee and
Robert Kuok as key investors. According to the mainland financial magazine Caijing, a subsequent S$800 million convertible bond issue in Singapore in February this year was made on terms which suggest the company is very stretched and badly needs to keep its share price from falling. It is now little more than half its initial price and down 75 percent from its peak.

Australia, once seen as a safe if unexciting location for Singapore cash, has also attracted top of the market deals from Singapore Power. Already well-established in Australia, it paid heavily in cash for the eastern Australia assets of pipeline company Alinta but with values in decline they have been unable now to flip them into their 51 percent owned local subsidiary SP Ausnet leaving SP meanwhile saddled with huge borrowings.