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Singapore’s state-owned fund Temasek has stated it is going to prioritise US investments and be “cautious” about China after warning that its giant publicity to the world’s second-biggest economic system had hit its efficiency.
Temasek, one of many world’s greatest state-owned funding teams, stated on Tuesday that the worth of its portfolio rose simply 2 per cent to S$389bn ($288bn) within the yr to March.
Whereas these figures lag behind a 28 per cent achieve for the S&P 500 inventory index over the identical interval, the rise was an enchancment on final yr when its worth tumbled 5 per cent in its worst returns since 2016.
Progress from investments within the US and India was “offset by the underperformance of China’s capital markets”, Temasek stated in its annual evaluation. The MSCI China index was down 19 per cent throughout the identical interval.
China is Temasek’s third-biggest market after Singapore and the Americas, with 19 per cent of its portfolio tied to the nation. The group has been one of many massive beneficiaries of China’s development over the previous 20 years with bets on expertise giants Tencent and Alibaba and ecommerce group Meituan.
“What we’d wish to see is shopper confidence returning and spending going up” in China, Chia Track Hwee, Temasek’s deputy chief govt, instructed the Monetary Instances.
He stated Sino-US tensions had altered its method. “Within the US we attempt to spend money on corporations that don’t depend on importation from China. And in China, we spend money on corporations that don’t depend on exports to the US.”
Chia additionally struck a cautious observe on synthetic intelligence funding. He stated Temasek was “not in a rush” to place cash behind the AI increase and warned of “hype” within the trade.
The state-backed group didn’t plan to speculate instantly in OpenAI, he stated, however added that individuals “shouldn’t be stunned” if it had publicity to the corporate by means of investments in enterprise capital funds. Temasek was in discussions to spend money on OpenAI, the FT reported in March.
Chia stated Temasek’s method to early-stage AI start-ups was “to speculate by means of VC funds who’re rather more nimble and they’re going to construct a portfolio across the area”, including: “We are going to most likely do direct investments on the again of what we study from that.”
Temasek stated final yr it was “disillusioned” with its $275mn wager on failed cryptocurrency alternate FTX. It was compelled to jot down off its stake after the corporate collapsed, prompting a uncommon backlash from buyers.
“When there’s a variety of capital coming into any space one must be watchful,” Chia stated at a press convention, figuring out “the AI hype” and the increase in personal credit score as two areas of exuberance.
Temasek stated the US would proceed to be “the most important vacation spot of our capital” exterior Singapore. It stated it might enhance its give attention to India, Japan and south-east Asia, markets which have benefited as world buyers search to chop their publicity to China as development slows and geopolitical tensions rise.
Temasek praised the efficiency of London-based financial institution Customary Chartered, regardless of chief govt Invoice Winters in February describing its share value as “crap”. Temasek is the lender’s greatest shareholder.
“I feel the working efficiency truly improved fairly considerably” over the previous three years, stated Connie Chan, Temasek’s head of economic providers.
Temasek has over time shifted from public equities to non-public markets, growing its allocation to unlisted property to 52 per cent of its portfolio as of March from 20 per cent in 2004.
Whereas it benefited from a non-public fairness increase, executives have warned that funds face the prospect of decrease returns as rising rates of interest have hit its debt-fuelled mannequin.
“Low rates of interest, with a variety of leverage to make acquisitions, drove some a part of the returns within the personal fairness area,” stated Alpin Mehta, head of actual property and deputy head of personal fairness fund investments at Temasek.
“However even in case you needed to take that and strip that off, I feel the returns are nonetheless pretty engaging.”