“There are significant key challenges in the future,” Pillay said in a statement on the annual review – his second since taking charge in October 2021. “The investment climate has become much more complex than what we have encountered since the global financial crisis.”
The firm will invest at a moderated pace this financial year but is ready to step up its investments in a market correction, said Chief Investment Officer Rohit Sipahimalani, who flagged the risk of recessions in key developed markets.
“We do believe that to get inflation under control, we probably will need to see a recession, although the timing for that is uncertain,” Sipahimalani said at a news briefing.
Temasek’s woes come as the Singapore government grapples with a budget deficit and rising costs of services. Investment returns from Temasek, GIC Pte and the Monetary Authority of Singapore are among the biggest contributors to the national budget.
Part of the slump in performance relates to fiscal-year timing – much of the drop in public equity valuations that followed Russia’s invasion of Ukraine took place after March 2022. The S&P 500 fell more than 9 per cent during the period.
The mark-to-market losses stemmed from an accounting policy that was introduced in the year ended March 2019, said Chief Financial Officer Png Chin Yee, describing them as “paper losses.”
The firm faced setbacks from the collapse of companies it invested in. Temasek was forced to write off its US$275 million investment in FTX after the cryptocurrency exchange’s collapse amid allegations of fraud.
“FTX was an aberration,” Pillay said, acknowledging the reputational damage was significant.
Another high-profile investee, Singapore-based start-up Zilingo Pte, also suffered a dramatic fall from grace despite boasting several high-profile investors on its board including a representative from Temasek.
Investments in Singapore remained the largest contributor to Temasek’s portfolio for the second year in a row and now stand at 28%, up from the 27% recorded last year. While the firm has remained bullish on China for several years, holdings in the country remained unchanged at 22 per cent of its portfolio.
The firm’s pace of deals decelerated greatly to S$31 billion (US$23 billion), compared with the S$61 billion (US$45 billion) made in the prior year. That comes after Sipahimalani said last year he’d be slowing the speed of deal-making, warning that valuations still hadn’t fallen far enough to reflect the downside he expected to take place.
China Woes
Temasek has continued to back Chinese companies. It added to holdings in Alibaba Group Holding Ltd. ’s US shares during the March quarter, according to 13F filings, and it also bought shares in rival e-commerce provider JD.com Inc. Both have fallen in value since then.
China’s benchmark CSI 300 is among the worst-performing indices in the Asia-Pacific region this year. Foreign funds are cutting exposure and limiting flows to the market as the economy weakens and relations with the US remain tense.
“We need to apply a geopolitical lens to all our investments,” Sipahimalani said. “For example, we won’t invest in areas that are in the cross hairs of US-China tensions,” he said. “We’ll prefer to invest in companies that have access to large domestic markets.”
Temasek is looking to invest more in Southeast Asia due to the region’s favourable demographics and digital economy, Pillay said.
Pillay also said there is a greater need for Temasek to engage more deeply with domestic companies in its portfolio, given the increasing uncertainties and complexity abroad.
Singapore’s Temasek bulks up stake in JD.com as Didi drops out of official list
Temasek remains the dominant investor in local stalwarts from Singapore Airlines Ltd. to Singapore Telecommunications Ltd. and oil-rig giant Seatrium Ltd.
Temasek’s chief financial officer Png Chin Yee said the company, which is an investor in Chinese finance company Ant Group, was hopeful the China tech sector’s troubles were over after signs a regulatory crackdown was ending.
Png said Temasek was optimistic about recent developments concerning the Chinese tech sector.
After hitting Ant Group with a US$984 million fine, the People’s Bank of China said on Friday that most of the main problems platform companies’ businesses were facing had been rectified and regulators would shift their focus to overall regulation of the industry rather than specific companies.
“We view it quite positively, right, obviously there was a lot of overhang in the tech sector,” Png said.
“So I think this is actually a good development for the sector. You can see the stock prices have reflected this as well.”
Most of China’s tech companies share prices have rallied since Friday on the hope that strict regulations that have stymied growth for more than two years would ease.
Ant and its subsidiaries were fine for having violated laws and regulations in areas including corporate governance, financial consumer protection, payment and settlement business, according to the PBOC.
“Ant still has got strong advantages. It has got great technology, it’s got a great track record in innovation. So, once this is sort of behind them, they can really focus on stabilising and growing,” Png said.
Ant and its subsidiaries were fine for having violated laws and regulations in areas including corporate governance, financial consumer protection, payment and settlement business, according to the PBOC.
“Ant still has got strong advantages. It has got great technology, it’s got a great track record in innovation. So, once this is sort of behind them, they can really focus on stabilising and growing,” Png said.
Additional reporting by Reuters
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