Temasek’s Assets May Have Jumped to a Record on Rallying Stocks

  • State firm may have bounced back with 13% gain, CIMB estimates
  • Stakes in Alibaba, Standard Chartered to help boost returns

Temasek Holdings Pte’s assets probably jumped to a record in the year through March as stocks rallied and the Singapore state investment firm struck more private deals.

The value of Temasek’s portfolio increased 13 percent to S$273 billion ($197 billion) in the 12 months ended March 31, CIMB Private Banking estimated. That’s a switch from a 9 percent slide the previous fiscal year that was its worst performance since the global financial crisis.

Singaporean sovereign wealth fund GIC Pte warned on Monday the outlook for returns may be challenging for as long as a decade amid high valuations and sluggish global growth. Temasek may keep boosting investments in unlisted assets, which accounted for almost two-fifths of holdings a year ago and have delivered better returns than listed securities since 2002.

“Although private-equity valuations have gone up, it still offers better opportunities than listed assets,” CIMB’s Singapore-based economist Song Seng Wun said. “Temasek will continue looking around for non-listed assets as there’s not much to gain in stock markets, especially in the developed world.”

The majority of Temasek’s new investments over the past financial year were in private markets, Song added. In February, Temasek opened an office in San Francisco to tap investment opportunities on the West Coast, a breeding ground for tech startups.

Temasek’s portfolio gained as the Standard & Poor’s 500 Index advanced 15 percent during the fiscal year. A 12 percent advance in Singapore’s Straits Times Index also pointed to gains for the investment firm, which had 29 percent of its assets in Singapore as of March 2016.

A comeback by U.K. lender Standard Chartered Plc helped boost Temasek’s performance, with the bank’s shares gaining 61 percent after a battering the previous financial year. Temasek is the bank’s biggest shareholder. Likewise, DBS Group Holdings Ltd., the largest lender in Southeast Asia, surged ahead and Temasek also benefited from Chinese banks’ gains, after a bloodbath the previous year.

Total Returns

Alibaba Group Holding Ltd., in which Temasek was one of the early investors, powered ahead. Gains were muted from the investment firm’s single most valuable holding: shares of Singapore Telecommunications Ltd. rose 2.6 percent over the financial year.

The firm’s total shareholder return -- compounded, annualized and including dividends -- was 15 percent in Singapore dollar terms through March 2016 from Temasek’s inception in 1974, according to the firm. For the past 10 and 20 years, the number was much lower: 6 percent for both periods, dragged down by slumps such as last year’s slide and the global financial crisis.

Hunting for returns, Temasek takes on “significantly higher” risks than the “fairly conservative” GIC, Singapore’s sovereign wealth fund, GIC says on its website. Chief Executive Officer Ho Ching has overseen a more than doubling of Temasek’s assets since she took over in 2004.

New Investments

The London-based Sovereign Wealth Center estimates Temasek reduced new investments in Asia by about 75 percent in the year through March 2017 from the previous period.

“Temasek has long held a home-field advantage investing in Asia, where its portfolio is concentrated,” said Jess Delaney, head of data and research at the center. “But such a large exposure left it vulnerable to the slowdown in China, and subsequent ripple effects across the wider Asia-Pacific region. Temasek got stung in fiscal 2016 and has clearly cooled off its activities in Asia.”

Temasek’s moves in the past year include:

  • Buying the remaining shares in Singapore rail operator SMRT Corp. for S$1.2 billion, a step to taking the firm private.
  • Selling shares in Thailand’s Intouch Holdings Pcl and India’s Bharti Telecom Ltd. for S$2.47 billion to Singapore Telecommunications Ltd., with the payment including Singtel stock.
  • Investing $250 million in the China operations of health care firm Columbia Pacific Management.
  • Injecting money into U.K.-based university venture fund Oxford Sciences Innovation.
  • Investing $800 million in Verily Life Sciences LLC, the medical arm of Alphabet Inc.
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