Temasek’s portfolio value declined for the first time in seven years, as the worth of its stake in UK bank Standard Chartered fell sharply over the financial year while China’s economic slowdown dented its Asian investments.
The Singapore state investment company said on Thursday that the value of its holdings fell S$ 24bn to S$ 242bn (US$ 180bn) over the 12 months to March 2016.
The annual decline was Temasek’s first since 2009, when the investor reported a disastrous year following the global financial crisis.
Temasek’s total shareholder return was a minus 9 per cent for 2015-16, reflecting declines in the share prices of its listed investments. Net profit, excluding non-controlling interests, fell 42 per cent year on year to S$ 8.4bn.
Michael Buchanan, Temasek’s head of strategy, said: “Markets especially in Asia have been quite volatile. Political pressures may increase downside risks, not just Brexit but the rise in Euroscepticism more generally.”
“We see an environment of generally lower returns in the years ahead,” he added.
Mr Buchanan said Temasek’s view was that China would overcome its economic challenges, including its rising debt levels.
“This has been especially true for corporate debt which has reached unusually high levels for a country at China’s stage of development. The future path may be bumpy,” Mr Buchanan said.
Enrico Soddu, head of data and research at the Sovereign Wealth Center in London, said: “Temasek is obviously very exposed to China’s slowdown, directly as it allocates 25 per cent to China, and indirectly as it owns almost 70 per cent in Asian holdings that are affected by any China slowdown.”
Temasek’s portfolio remains focused on Asia, with more than two-thirds of its of assets in the region. But the US accounted for the largest share of new investments during the financial year, reflecting Temasek’s positive view of the US economy.
Temasek invested S$ 30bn and divested S$ 28bn, a record amount, in the 2015-16 financial year.
Lee Theng Kiat, chief executive of Temasek’s management arm Temasek International, said: “We saw the liquidity-driven market rally earlier in the year and took the opportunity to step up our divestment pace.
“The record divestment reflected in part our plan to reshape our portfolio, in line with what we saw were the longer term trends, such as in the financial, life sciences or digital space.”
In the previous fiscal year, the investment company has acquired or added to holdings in US pharmaceuticals and healthcare groups including Gilead Science, as it sought to exploit the trends of ageing populations worldwide and a growing middle class in developing countries.
Temasek also bolstered its position in the US logistics sector with a US$ 450m investment in Univar, a chemical distributor.
China accounted for the largest share of Temasek’s Asia investments. The Singapore state company raised its investment in Didi Chuxing, China’s rival to Uber, and Meituan-Dianping, China’s largest food delivery and group buying company.
Temasek’s major divestments included its majority interest in Stats ChipPac, Southeast Asia’s biggest assembler of semiconductors, which was acquired by China’s Jiangsu Changjiang.
Shares in London-listed Standard Chartered, of which Temasek is the biggest shareholder, more than halved during the financial year, wiping £11.6bn off the value of the holding. Bill Winters, who took over as StanChart’s chief executive in May last year, has axed 15,000 jobs and outlined plans to cut 30 per cent from its $ 10bn cost base.
Png Chin Yee, Temasek’s head of financial services, said StanChart’s new chief executive had made a good start. She said Mr Winters had “steadied the ship, securing the foundations with a rights issue, and he’s also started repositioning the bank”.
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