Merrill Lynch (MER) may receive a capital infusion of as much as $5 billion from Temasek Holdings, Singapore's $100+ billion sovereign wealth fund, according to a report by The Wall Street Journal. With a market capitalization of $46.65B as of Thursday's close, the investment could amount to a more than 10% stake, exceeding the $5B, 9.9% non-controlling investment China Investment Corp. made Wednesday in rival Morgan Stanley (MS) (full story). 
The firms had no comment. Sources say the two parties are in "advanced talks," but notes a deal "may still not materialize" and there is the possibility Merrill is in discussions with other government investment funds.
Merrill Lynch faces more mortgage writedowns, with some analysts predicting the total could reach nearly $16B for the second-half of this year, which would be more than estimated writedowns at UBS (UBS) $14.2B, Citigroup (C) $10B - $13B and Morgan $10.4B. A Credit Suisse analyst says Merrill may be forced to sell assets such as its 20% stake in Bloomberg LP. Merrill also owns a 49% stake in BlackRock Inc., but is blocked from selling until Sept. 2009; Merrill said it plans to maintain its stake. Adding to Merrill's woes is the possibility hedge agreements with recently downgraded (to junk-bond status) bond insurer ACA Financial Guaranty become worthless. Shares of Merrill Lynch lost 0.4% to $54.50 on Thursday. Merrill is a top-five holding of the ETFs IAI and KCE.
Additional Reading: Handy Guide to SWF Investments in Financial Firms • Merrill Lynch Q3 2007 Earnings Call Transcript
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