TEMASEK Holdings has finally broken its silence following repeated calls by the media and the public to explain why it sold its stake in Bank of America (BoA).

Spokesman Myrna Thomas said on Thursday that its 'investment thesis' had changed after its holding in Merrill Lynch was converted into BoA shares following Merrill's takeover by the bank.

'Our investment thesis had changed from Merrill's specific businesses to the more diversified BoA linkage to the broader US economy,' she said.

Singapore's state-owned investment vehicle sold off all its shares in the the US bank in the first three months of this year, resulting in estimated losses of between US$2.3 billion and US$4.6 billion.

Many in the market had speculated that a key reason for the sale was that BoA did not fit into Temasek's strategy. Its original US$5.1 billion investment was in Merrill Lynch, a global franchise long known for its 'thundering herd' of stockbrokers. BoA, on the other hand, has most of its key businesses in the United States.

Ms Thomas also said the risk-return environment had changed substantially and so the company decided to divest its BoA stake. 'This move to balance risks against opportunities is part and parcel of our discipline of investing and divesting sustainable long-term returns on our entire portfolio,' she said.

While she did not elaborate in her statement what exactly these risks and returns are, people familiar with Temasek's thinking say BoA was facing potential cash calls and leadership problems - risks hard not to ignore.

At the same time, the returns that could be eked out from investments focused on the US were perhaps not as compelling as those that could be sought from in Asia and emerging markets such as Brazil and Russia.

Observers welcomed Temasek's response but said there are still questions that need to be clarified.

First, why did Temasek dump all its stake in BoA? Could it not, for example, have sold half first, and then the rest much later?

Read the full story in Friday's edition of The Straits Times.