A decision by the family of Thai Prime Minister Thaksin Shinawatra to sell Temasek its 49.6 percent stake without paying tax on the gain fuelled street protests in Bangkok, forcing an early election and leading to Thaksin's resignation on Tuesday.

Shares in telecoms conglomerate Shin have fallen since the deal was struck, leaving Temasek and two majority-owned Thai holding companies sitting on a paper loss of over $850 million on their holding, which was 96 percent as of March 14.

Temasek spokeswoman Eva Ho declined to comment on whether any provisions would be made for the financial year that ended on March 31 -- Friday of last week.

Temasek was "committed as a long term investor in Shin Corp and Thailand", Ho said.

Under Singapore accounting rules, Temasek would have to carry out impairment tests to determine if it needed to take a charge for the investment. But it is likely to affect Temasek's total shareholder returns for the year that has just ended.

With a portfolio of $64 billion as of March 2005, Temasek has bought stakes in telecoms, financial and transport companies in Asia and elsewhere in the last 12 months.

Shin Corp shares traded at 38 baht on Wednesday afternoon, down 23 percent from Temasek's purchase price of 49.25 baht a share.

POLITICAL RISKS

"Temasek has said they are mindful of the political implications of every deal. Obviously, one or two deals could go wrong and they suffer a setback -- and this is obviously one of them," said an analyst with a European investment firm.

Some analysts said more scrutiny of Shin Corp could be expected in coming months including the firm's rapid growth in the last few years.

Shin Corp's net profit more than tripled to 8.6 billion baht in 2005 from 2.8 billion baht in 2001, while total assets doubled to 78.4 billion baht from 41.4 billion baht over the same period, according to Reuters data.

Others said it was too early to say if Temasek's investment in Shin Corp would suffer in the long term.

Greg Pau, analyst at Standard & Poors, said: "I don't see any indication that business should be affected. My experience and common sense would say if indeed that happens, that would not bode too well for a country which is trying to attract foreign investment."

Shin Corp owns 43 percent stake in Advanced Info Service , rated A- by S&P and with a dominant 55 percent share of the Thai mobile phone market.

"It is a very solid rating. The financial position of AIS is relatively lowly geared. I mean this is probably one of the stronger assets that one can think about buying in Southeast Asia," said Pau.

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