Mumbai: Bank of America's $50-billion acquisition of the battetred Merrill Lynch may give Singapore's Temasek, the largest single investor in the US bank, with a 14-per cent stake, a notional $1.5 billion gain on its near $6 billion investment.

Bank of America's offer price, which values Merrill Lynch at $29 a share, may give Temasek some solace. But, for  the Singapore government-controlled Temasek and most other sovereign funds, which bet on a financial sector whose troubles were far from over, the risks remain.

Temasek originally invested $5 billion in Merrill at $48 a share between December and February, but a reset payment for losses on the original investment and additional $900 million investment pared the acquisition price to just over $23 a share.

At Bank of America's offer price of $29 a share, Temasek would have made a $1.5 billion profit on its investment. But, with the stock currently ruling at  $17.06 a share, Temasek's investment could still run into a loss.

The acquisition pulled down Bank of America stock also, which was down $7.19 or 21.3 per cent at $26.55.

Temasek will end up owning shares in Bank of America, but the challenge of integration and dealing with Merrill's bad debts may drag bank of America shares  down over time.

Temasek saw opportunities in financials at the head of a market contagion and raised its investments in the sector to 40 per cent of its portfolio in the year to end-March from 38 per cent previously.

Temasek, headed by Ho Ching, the wife of Singapore's prime minister, has been expanding outside its Asian base and holds stakes in major western banks like Barclays and Standard Chartered.

Other possible gainers include Korea Investment Corporation, one of at least six investment funds that bought a combined $6.6 billion of convertible preferred shares from Merrill in January and later converted 72 million Merrill shares at $27.50 apiece.

The Kuwait Investment Authority held a 6-per cent stake, or about 73.9 million shares, in Merrill after converting $2 billion of convertible preferred stock, according to a regulatory filing with the Securities and Exchange Commission.

In Dubai, state-owned investment agency Mubadala, however, said it was not looking to bail out any financial companies in difficulty as the strong growth in the financial sector crimped and banks scaled back risky investments.