A Temasek Holdings sign at its Singapore office.
Munshi Ahmed | Bloomberg | Getty Images
Singapore’s Temasek said on Tuesday that most of its investment capital will continue to go to the US as the state-owned investment firm focuses on early adopters of artificial intelligence among the country’s traditional industries.
While the US as a whole appears to be expensive, the S&P equal-weighted index is just 16 times earnings, which is below its long-term average, Rohit Sipahimalani, Temasek’s chief investment officer, told CNBC.
Temasek, which did not give a precise breakdown of its exposure to US assets, said the Americas region made up 22% of its portfolio.
The company, whose portfolio value rose nearly 2 percent to 389 billion Singapore dollars ($288 billion) in the financial year ended March, added that it was cautious in the Chinese market.
He pointed out that while China’s government has a pro-growth stance that will help its recovery, structural challenges remain in the economy and without an increase in domestic demand, China’s economy and inflation rates will continue to face downward pressure.
Temasek deputy chief executive Chia Song Hwee said the challenges facing China are largely on the demand side of the economy.
Companies that “drive domestic consumption or satisfy domestic consumption,” such as in areas such as biotech, robotics and the e-mobility and electric vehicle value chain will be interesting, Chia said.
He added that while some of these businesses have export potential, due to geopolitical risks, the company is really looking at companies that can rely solely on the domestic market and are less dependent on exports to other countries.
Overall, Temasek will maintain a cautious approach and continue to monitor government policies in the world’s second-largest economy, the state investor said. Chinese assets made up 19% of Temasek’s portfolio, up from 22% in FY2023.
The company is also looking to invest in Japan, which has seen a surge in foreign investor interest as its markets have soared to record highs this year.
Alpin Mehta, deputy head of private equity investments at Temasek, explained that Japan’s corporate scene continues to benefit from structural and cyclical headwinds due to corporate governance reforms.
“In the last couple of years, we’ve seen a recovery in private equity activity in Japan, and these are some of the funds that we’re investors in. So our idea is to invest with them, to co-invest with them.”
Temasek has seen its exposure to Japan grow to 1 percent, from “almost nothing two years ago,” Mehta said, adding that it was still “early days.” Some of Temasek’s portfolio companies have exposure to Japan, such as Vertex Capital, as well as real estate companies Capitaland and Mapletree, he pointed out.
The company sees opportunities in India due to its large domestic market and supply chain diversification, as well as in Europe, where it sees opportunities in the green energy transition.
For the 2024 financial year, Temasek has made investments of SG$26 billion in areas such as technology, financial services and healthcare.
Outside of Singapore, most of Temasek’s investment capital went to the US, followed by India and Europe.
Portfolio performance
After marking its unlisted assets to market, Temasek’s net portfolio value stood at SG$420 billion, up from SG$411 billion a year earlier.
Temasek said it chose to release this metric as unlisted assets made up the majority of its portfolio at 52%, up from 20% in 2004. line with our peers.’
Sipahimalani said “over the last decade we’ve found that we have more advantages on the private side, just because it’s a function of our better access, how we can work with these companies and so on.”
He explained that the company does not have a target index for unlisted and listed assets in its portfolio, but will invest when it finds the right opportunities.
“We have to have a balance of liquidity versus private assets. So it’s always going to be a balance out there, but there’s no specific target that we have. I think we’re pretty comfortable,” he adds.
While one-year total shareholder return rose only 1.6%, from a 5% decline in 2023, Temasek’s 10-year total shareholder return was flat at 6%, while the 20-year metric was slightly flat at 7% from 9 .%.
This was due to the exclusion of the 2004 financial year, which saw an annualized TSR of 46% following the SARS pandemic.
Separately, the company divested SG$33 billion for the financial year, resulting in a net divestment of SG$7 billion, compared to a net investment of SG$4 billion a year ago.