Temasek’s portfolio value falls as divestments grow
Firm moderates investment pace amid volatility in global markets, US-China tensionsTemasek says that it is watchful about the risks of a late-cycle recession in the US
MUMBAI : Singapore’s state investment arm Temasek on Tuesday said its total portfolio value in US dollar terms fell to $231 billion in the year ended 31 March, compared to a portfolio value of $235 billion a year ago, as divestments outpaced investments amid challenging global macroeconomic conditions.
This is the first decline in Temasek’s portfolio value since 2016. In the year ended 31 March 2018, Temasek saw its portfolio jump sharply to $235 billion, from $197 billion in the previous year.
“The company anticipated an increasingly challenging environment since last July, and moderated its investment pace, investing some S$24 billion ($18 billion) and divesting S$28 billion ($21 billion) for the year," the investor said in a statement.
Equity markets have been volatile for the past year-and-a-half, the firm said, adding that concerns remain around escalating tensions, especially between China and the US. “These tensions may further moderate global growth," it said.
Temasek added that it is also watchful around the risks of a late cycle recession in the US, while Brexit and political fragmentation continue to weigh on Europe.
“The outlook in China may come under more pressure from a prolonged standoff with the US. This may be mitigated by its awareness of macro risks and policy headroom. Overall, we remain optimistic on China’s trajectory in the medium term, on the back of timely and targeted reforms to transition the economy towards a more sustainable growth path," said Temasek.
It noted that in its home market of Singapore, activity is moderating alongside global growth, with increasing downside risks from global tensions.
“While the increasingly challenging global environment may dampen business confidence and investment, we expect policymakers to be primed for dovish policies that could cushion any substantive pressure on growth," said Png Chin Yee, senior managing director, portfolio strategy and risk group at Temasek.
If growth continues to be weak, the low interest rate environment is likely to persist into the foreseeable future, he said, adding that this could lower returns expectations for the longer term.
Asia continued to account for a majority of Temasek’s portfolio at 66%, with Singapore and China accounting for 26% each. The investor said that it has been growing its exposure to Europe (10%) and North America (15%) in line with emerging trends and opportunities, adding these two regions now form a quarter of its underlying portfolio exposure.
“Geographically, the US again accounted for the largest share of our new investments during the year, followed by Europe and China. Our underlying exposure is 60:40 in mature economies and growth regions," Temasek said.
From a sector perspective, financial services and technology remained the key investment focus for Temasek.
“Financial services remain as the largest share (25%) of our portfolio by sector. For our new investments, we continue to focus on non-bank fintech and payments platforms such as Ant Financial in China that operates the flagship Alipay payments platform; and Global Payments, a global payment solutions provider," the investor said.
On the technology side, Temasek invested in companies such as UST Global, a digital solutions provider, DoorDash, an online food delivery marketplace, and Indian ride-hailing company Ola Cabs.
“We have been investing in structural trends driven by transformational technologies, sustainable living, longer lifespans, and changing consumption patterns as people’s income grow and lives get uplifted. Going forward, we will increasingly reshape our portfolio in line with these trends," said Dilhan Pillay, CEO at Temasek International.
He added that Temasek has been increasing its exposure to unlisted companies. “Investments in this space have generally performed well and provided us with better returns than listed ones since 2002," added Pillay.
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