Singapore’s state-owned fund Temasek has mentioned it is going to prioritise US investments and be “cautious” about China, after warning that its massive publicity to the world’s second-biggest financial system had hit its efficiency.
Temasek, one of many world’s greatest state-owned funding teams, mentioned 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.
Development from investments within the US and India was “offset by the underperformance of China’s capital markets”, Temasek mentioned in its annual assessment. 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 huge beneficiaries of China’s development over the previous twenty years with bets on know-how giants Tencent and Alibaba and ecommerce group Meituan.
“What we’d prefer to see is client confidence returning and spending going up” in China, mentioned Chia Tune Hwee, Temasek’s deputy chief govt, in an interview with the Monetary Occasions.
He mentioned Sino-US tensions had altered its strategy. “Within the US we attempt to put money into firms that don’t depend on importation from China. And in China, we put money into firms that don’t depend on exports to the US.”
Chia additionally struck a cautious observe on synthetic intelligence funding. He mentioned Temasek was “not in a rush” to place cash behind the AI growth and warned of “hype” within the business.
The state-backed group didn’t plan to take a position immediately in OpenAI, he mentioned, however added that individuals “shouldn’t be shocked” if it had publicity to the corporate by investments in enterprise capital funds. Temasek was in discussions to put money into OpenAI, the FT reported in March.
Chia mentioned Temasek’s strategy to early-stage AI start-ups was “to take a position by VC funds who’re far more nimble and they’re going to construct a portfolio across the area. We are going to most likely do direct investments on the again of what we study from that”.
Temasek mentioned final yr it was “disillusioned” with its $275mn guess 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 quite a lot of capital coming into any space one must be watchful,” Chia mentioned at a press convention, figuring out “the AI hype” and the growth in personal credit score as two areas of exuberance.
Temasek mentioned the US would proceed to be “the biggest vacation spot of our capital” outdoors Singapore. It mentioned it might enhance its concentrate on India, Japan and south-east Asia, markets which have benefited as international 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 believe the working efficiency really improved fairly considerably” over the previous three years, mentioned 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 belongings to 52 per cent of its portfolio as of March from 20 per cent in 2004.
Whereas it benefited from a personal fairness growth, 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 quite a lot of leverage to make acquisitions, drove some a part of the returns within the personal fairness area,” mentioned Alpin Mehta, head of actual property and deputy head of personal fairness fund investments at Temasek.
“However even when you needed to take that and strip that off, I believe the returns are nonetheless pretty enticing.”
