Temasek to prioritise US offers and keep cautious on China

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Singapore’s state-owned fund Temasek has stated it’ll prioritise US investments and be “cautious” about China, after warning that its massive 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 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 stated in its annual overview. 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 know-how giants Tencent and Alibaba and ecommerce group Meituan.

“What we’d prefer to see is shopper confidence returning and spending going up” in China, stated Chia Track Hwee, Temasek’s deputy chief govt, in an interview with the Monetary Instances.

He stated Sino-US tensions had altered its method. “Within the US we attempt to put money into corporations that don’t depend on importation from China. And in China, we put money into corporations that don’t depend on exports to the US.” 

Chia additionally struck a cautious be aware on synthetic intelligence funding. He stated Temasek was “not in a rush” to place cash behind the AI growth and warned of “hype” within the trade.

The state-backed group didn’t plan to speculate straight in OpenAI, he stated, however added that individuals “shouldn’t be shocked” 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 stated 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 house. We’ll in all probability do direct investments on the again of what we study from that”.

Temasek stated final yr it was “upset” with its $275mn guess on failed cryptocurrency change FTX. It was compelled to write down off its stake after the corporate collapsed, prompting a uncommon backlash from traders.

“When there’s loads of capital coming into any space one must be watchful,” Chia stated at a press convention, figuring out “the AI hype” and the growth in non-public 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 will improve its concentrate on India, Japan and south-east Asia, markets which have benefited as world traders 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 worth as “crap”. Temasek is the lender’s greatest shareholder.

“I believe the working efficiency truly improved fairly considerably” over the previous three years, stated Connie Chan, Temasek’s head of monetary companies.

Temasek has over time shifted from public equities to personal 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 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 loads of leverage to make acquisitions, drove some a part of the returns within the non-public fairness house,” stated Alpin Mehta, head of actual property and deputy head of personal fairness fund investments at Temasek. 

“However even for those who needed to take that and strip that off, I believe the returns are nonetheless pretty enticing.”