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Temasek’s Assets Rise to S$193 Billion Peak With Asian Focus

Temasek Holdings Pte Ltd Chief Executive Officer Ho Ching
Temasek Holdings Pte Ltd chief executive officer Ho Ching. Photographer: Charles Pertwee/Bloomberg

Temasek Holdings Pte, Singapore’s state-owned investment company, said the value of its assets climbed 3.8 percent to a record last fiscal year and profit more than doubled on increased contributions from its holdings.

Temasek’s assets climbed to S$193 billion ($157 billion) in the year to March 31, surpassing last year’s record of S$186 billion, the firm said in its annual report today. Net income jumped to S$12.7 billion from S$4.6 billion a year earlier.

The Singapore-based company spent more in emerging markets including China, India, Brazil and Mexico, as developing nations led the global economy’s recovery from its worst recession since World War II. Temasek said it’s still seeking investments in China after raising $3.6 billion selling stakes in two of the nation’s three biggest banks this week.

“We will continue to invest in the transforming economies of Asia and Latin America,” Chief Executive Officer Ho Ching said in a statement today. “At the same time, we remain open and ready to participate in opportunities in mature markets such as our recent investments in the U.S.”

Net income rose as contributions from investments increased and earnings improved at its portfolio companies. Temasek, founded to help develop the island’s banks, airlines and ports, funds investments from the income of the companies it owns, and not from government budget surpluses or oil revenue.

The value of Temasek’s assets was expected to rise to about S$200 billion, according to Victoria Barbary, senior analyst at Monitor Group in London and Song Seng Wun, Singapore-based economist at CIMB Research Pte. The MSCI Emerging Markets Index advanced 16 percent in the 12 months ended March 31, outpacing the 11 percent gain in MSCI World Index of developed nations.

Asset Allocation

Temasek said group net debt was reduced to S$9.5 billion from S$17.8 billion a year earlier as it increased its cash position, which was positive at the end of the year.

“If there are opportunities in the credit market we obviously would like to access those opportunities,” Dilhan Pillay Sandrasegara, Temasek’s head of portfolio management, said at a press conference today.

Asian investments made up 77 percent of Temasek’s underlying portfolio on March 31. Investments in Singapore were 32 percent of assets, while holdings in the mature economies of Australia, New Zealand, North America and Europe were 20 percent.

Structural Issues, Imbalances

“Medium-term global recovery is clouded by deep structural issues and imbalances,” Chairman S. Dhanabalan said in the annual report. “Longer term, we remain bullish on Asia, despite medium-term inflationary and other pressures in various parts of the world.”

The percentage of financial services in Temasek’s portfolio rose to 36 percent from 35 percent; transportation and industrials were unchanged at 23 percent; telecommunications, media and technology shrank to 22 percent from 24 percent; and energy and resources grew to 3 percent from 2 percent.

Temasek said it invested S$13 billion during the year, including more than S$4 billion in recapitalizations and rights offers in Bank of China Ltd., Standard Chartered Plc and China Construction Bank Corp., while it sold S$9 billion of assets.

The company raised HK$28.2 billion ($3.6 billion) this week selling stakes in China Construction Bank and Bank of China, two of the country’s three biggest banks. It sold about HK$18.8 billion of Hong Kong-traded shares in Bank of China and about HK$9.4 billion in an offering of China Construction Bank stock.

Comfortable Position

“We’re still looking for opportunities in China and we’re comfortable with our position there,” Nagi Hamiyeh, Temasek’s managing director of investment, oversees investments in natural resources, and initiatives in Africa and the Middle East, said at a press conference in Singapore today.

China’s stocks underperformed in the first half on concern government measures to cool inflation will slow the economy. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 1.6 percent in the period, compared with a 0.5 percent gain in the MSCI Asia Pacific excluding Japan Index.

Temasek said it supported recapitalizations of portfolio companies, stepped up investments in the energy and resources industries and in other faster-growing developing economies such as Latin America. Its resources investments included Brazil’s Odebrecht SA, Oklahoma City-based Chesapeake Energy Corp. and GMR Energy Ltd.

Temasek, which aborted the appointment of Charles “Chip” Goodyear as chief executive officer in 2009, is seeking a successor to CEO Ho Ching, 58. Last year, Temasek named Executive Director Simon Israel president, along with Gregory Curl, once a candidate for CEO of Bank of America Corp., and former Singapore Exchange Ltd. head Hsieh Fu Hua. Israel retired from his executive and board roles effective July 1.

‘Fully Engaged’

“Ho Ching has unequivocally said to all of us that she’s staying at Temasek,” Sandrasegara said. “She remains our CEO, she’s fully engaged with us in everything that we do.”

Developing economies accounted for 60 percent of the number of direct investments made by sovereign wealth funds last year, up from 53 percent in 2009, according to Monitor Group, which collects data on the funds. The group said Temasek was the most active sovereign firm in 2010, making 38 investments.

Globally, sovereign fund assets climbed 11 percent from a year earlier to almost $4 trillion, London-based research firm Preqin Ltd. said in March. The market value of Norway’s sovereign fund increased 17 percent to 3.08 trillion kroner ($569 billion) last year.

The MSCI Asia Pacific Index and emerging-market measure lost as much as 9 percent from this year’s high on May 2 amid concern a slowing U.S. economy, Europe’s sovereign debt crisis and China’s steps to curb inflation will crimp earnings.

“We continue to see the rising middle income populations driving rapid urbanization and housing demands,” Temasek’s Dhanabalan said. “Innovation will spur demand for new services.”

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