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Singapore’s state-owned fund Temasek has mentioned it’ll 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 largest 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 acquire 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 mentioned in its annual evaluate. 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 large beneficiaries of China’s progress 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 Music Hwee, Temasek’s deputy chief government, advised the Monetary Instances.
He mentioned Sino-US tensions had altered its method. “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 be aware on synthetic intelligence funding. He mentioned Temasek was “not in a rush” to place cash behind the AI increase and warned of “hype” within the business.
The state-backed group didn’t plan to speculate straight in OpenAI, he mentioned, 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 put money into OpenAI, the FT reported in March.
Chia mentioned Temasek’s method to early-stage AI start-ups was “to speculate by means of VC funds who’re far more nimble and they’re going to construct a portfolio across the area”, including: “We’ll in all probability do direct investments on the again of what we study from that.”
Temasek mentioned final yr it was “dissatisfied” with its $275mn guess on failed cryptocurrency alternate FTX. It was compelled to write down off its stake after the corporate collapsed, prompting a uncommon backlash from traders.
“When there’s a whole lot of capital coming into any space one must be watchful,” Chia mentioned at a press convention, figuring out “the AI hype” and the increase in non-public 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 could enhance its concentrate on India, Japan and south-east Asia, markets which have benefited as international traders search to chop their publicity to China as progress slows and geopolitical tensions rise.
Temasek praised the efficiency of London-based financial institution Normal Chartered, regardless of chief government Invoice Winters in February describing its share value as “crap”. Temasek is the lender’s largest shareholder.
“I believe the working efficiency truly improved fairly considerably” over the previous three years, mentioned Connie Chan, Temasek’s head of economic companies.
Really helpful
Temasek has through the years 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 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 whole lot of leverage to make acquisitions, drove some a part of the returns within the non-public 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 engaging.”
