Singapore: Sovereign fund Temasek Holdings Pvt. Ltd, which pumped billions of dollars into Merrill Lynch and Co. Inc. and Barclays Plc., said its profit doubled last year in spite of the financial crisis due to the strong performance of its investments and on $12 billion (Rs52,920 crore) in asset sales.
Temasek, owned by Singapore’s government, said net profit rose to Singapore $18.2 billion (Rs56,092 crore) in the year to 31 March, from S$9.1 billion a year ago.
“The fallout of the credit crisis will continue to dampen the global economy over the next 24 months, with sharply escalated oil and food prices beginning to test inflation expectations,” chairman S. Dhanabalan said in the annual report published on Tuesday.
Temasek said it had made S$32 billion of new investments in fiscal 2007-08, double the S$16 billion it spent the previous year. Asset sales more than tripled to S$17 billion.
Anshukant Taneja, a credit analyst at ratings agency Standard and Poor’s, said higher investments in the financial industry had raised the group’s exposure to global trends of unpredictable asset cycles and contagion, which may affect its earnings. “This may impact Temasek’s ability to divest its stake in various entities and manage its portfolio.”
Temasek, which has bought 9% in Merrill Lynch, said it sees value in banking stocks in the US and Britain. “The financial service industry is one we believe in,” Manish Kejriwal, Temasek’s senior managing director for investment, International and India, told journalists at its annual briefing. “It’s a proxy to the economic growth. We recently concentrated on US and UK primarily because we see value.”
The company had no comment on whether it wanted to invest in beleaguered US bank Lehman Brothers Holdings Inc.
Kejriwal said 7% of Temasek’s global portfolio was invested in the “Asian region”, which includes India and Pakistan. This works out to S$13 billion, with a majority of this being invested in India.
Temasek is optimistic on India, especially with net cash flow into India from sources such as hedge funds having slowed down considerably following the global credit crisis, he said.
“The growth remains, and for a fund like us, which invests for the long term, the competition has also reduced.”
Chairman Dhanabalan said the group was worried about emerging risks of stagflation—the combination of low or no economic growth and inflation.
“This presents huge socio-political as well as economic risks in the next three to five years. Opportunities may be limited in such a scenario.”
Temasek, the smaller of Singapore’s two wealth funds ranking behind the Government of Singapore Investment Corp. Pte Ltd, has sought investments beyond markets of Asia excluding Japan to boost returns and diversify assets.
Sanat Vallikappen of Mint contributed to this story.