Temasek’s Assets Set to Reclaim Peak as Asia Pays Off

Ho Ching, chief executive officer of Temasek Holdings
Ho Ching, chief executive officer of Temasek Holdings, speaks during a news conference in Singapore. Photographer: Charles Pertwee/Bloomberg

Temasek Holdings Pte is set to post a record jump in the value of its assets as markets rebounded and the Singapore state investment firm increased bets in Asia.

Temasek will likely say assets recovered by about 40 percent to around the S$185 billion ($133 billion) peak reached two years earlier when it reports results for the 12 months to March 31, said Song Seng-Wun, an economist at CIMB Research Pte in Singapore. A year ago, assets plunged S$55 billion as Temasek lost on bank stakes during the financial crisis.

“It’s a pretty spectacular rebound,” Song said. “All that red from the previous year would have turned around very sharply in line with the strong performance of the market.”

Temasek bought more shares in PT Bank Danamon Indonesia and Neptune Orient Lines Ltd. over the past year, among investments that increased in value as markets recovered. The MSCI World Index rose 49 percent in the 12 months through March. Temasek, seeking a successor to Chief Executive Officer Ho Ching, 57, also spent more in Asia as the region led a rebound from the deepest global recession since World War II.

Globally, sovereign fund assets climbed 9 percent in 2009 from a year earlier to $3.5 trillion, London-based research firm Preqin Ltd. said in March. Norway’s sovereign wealth fund, the world’s second largest, said the value of its investments increased a record 26 percent last year. Khazanah Nasional Bhd., Malaysia’s state investment company, said in January the net value of its assets swelled 63 percent in 2009.

Temasek’s biggest jump in the value of its assets since it started reporting in 2004 was the year ended March 31, 2007, when it increased by S$35 billion.

‘War Chest’

Temasek said in September it had built a stronger net cash position since the credit crisis. Melvyn Teo, associate professor of finance at Singapore Management University, said the company is “building a war chest to take advantage of opportunities going forward.”

Wholly owned by Singapore’s Ministry of Finance, Temasek also doubled the size of its medium-term bond program to $10 billion, under which it raised S$5.4 billion between October and February. That’s in part to help develop the local debt market, said Victoria Barbary, senior analyst at Monitor Group in London, and “a good way of diversifying the capital base.”

Temasek is set to publish the annual report after real estate unit Mapletree Investments Pte said June 30 that profit surged 87 percent to S$393.8 million in the 12 months to March 31 from a year earlier, boosted by new developments and the increased value of its property holdings. It owns about S$6.8 billion of real estate assets.

Danamon, Neptune

Temasek’s participation in rights offerings by companies in its portfolio bolstered assets. It spent more than S$1 billion in the financial year buying additional shares of companies including Jakarta-based Danamon and Neptune Orient Lines Ltd.

Danamon’s shares have risen more than fourfold from the subscription price of 1,200 rupiah in April last year. Neptune Orient has risen 48 percent from the S$1.30 price offered to investors in June last year.

Excluding the purchase of rights shares, Temasek invested about $4.4 billion in 2009, down from $9.5 billion the previous year, according to estimates by Monitor Group. It completed 15 publicly announced deals worth about $2.1 billion this year, according to preliminary data compiled by the consulting firm.

No Chip

The company is unlikely to pick up the pace of investments in the coming months as Europe battles a sovereign-debt crisis and China attempts to contain asset-price bubbles, said Barbary.

“They are investing much less than we had seen them previously; it’s obviously a function of the markets, the losses, and the turmoil at management level,” she said. “There is also a sense that Temasek is trying to find its strategy and place.”

Temasek, which aborted the appointment of Charles “Chip” Goodyear last year to replace Ho, has named former Singapore Exchange Ltd. Chief Executive Officer Hsieh Fu Hua an executive director and president in charge of succession planning.

Last July, the company reversed its appointment of 52-year-old Goodyear, the former head of BHP Billiton Ltd., citing “differences regarding certain strategic issues.” BHP Billiton is the world’s largest mining company.

Ho, wife of Singapore’s Prime Minister Lee Hsien Loong, remains in charge of Temasek, which was founded in 1974 to foster development of the island’s banks, airlines and ports.

Temasek is the biggest shareholder in five of Singapore’s 10 biggest listed companies by market value including Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company, and DBS Group Holdings Ltd., the region’s largest bank by assets. SingTel fell 0.7 percent to S$3.05 as of 4:13 p.m. in Singapore trading today, while DBS lost 1 percent to S$13.82.

Energy, Resources

The asset manager has been diversifying into energy and resources, following the previous year’s S$16 billion of divestments including stake sales in Charlotte, North Carolina- based Bank of America Corp. and London-based Barclays Plc at losses. Temasek hasn’t disclosed the size of those losses.

Temasek spent at least $2 billion on energy and resources companies, including convertible preferred shares in U.S. natural gas producer Chesapeake Energy Corp. and Singapore-based agricultural commodities supplier Olam International Ltd., in the past 12 months, according to data compiled by Bloomberg.

Chesapeake shares have declined 11.1 percent since Temasek announced its investment on May 11, compared with an 11.4 percent decline in the Standard & Poor’s 500 Index. Olam has risen 61 percent since Temasek’s purchase.

Temasek will “continue to overweight more in Asia,” Ho said in September. It is seeking to invest in industries such as banking and infrastructure that are proxies for the economy and middle-class growth, she said.

Overseas Asian investments made up 43 percent of the portfolio last year, up from 16 percent in 2004.

“Temasek is looking at opportunities to latch on to the emerging market consumer base,” said Jan Randolph, head of sovereign risk at IHS Global Insight in London. “It’s a general shift from traditional investments in the West, because it’s ironic the West have the risk issues now.”

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