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Wed, Sep 09, 2020 – 5:50 am
Singapore
TEMASEK Holdings reported on Tuesday that its one-year total shareholder return (TSR) had fallen into negative territory amid the Covid-19 pandemic, and that it will remain cautious as it prepares for further uncertainty in the face of a cloudy outlook from Recovery.
The one-year TSR stood at -2.28% for the 12 months ended March 31, 2020. This is a further drop from the one-year TSR of the previous fiscal year, which had fallen to 1.49%.
TSR takes into account all the dividends distributed to its shareholder, less capital injections. The lower TSR was partly due to the strong market correction in the quarter to March 31 in response to the emergence of Covid-19, which was also seen in regional indices during that period.
Composed over 46 years from its inception in 1974, annualized returns stood at 14 percent.
Among the key risks cited by Temasek are growing concerns stemming from geopolitical and trade tensions between the United States and China and the impending US presidential election.
Even so, the United States and China will remain the “two main destinations for capital,” Dilhan Pillay Sandrasegara, CEO of Temasek International, told the media. But growing geopolitical tensions mean they have to “think broader” about investments and look beyond the robustness of business models, he added.
The state investment company had continued to increase its exposure to China despite the country coming under increased pressure from geopolitical tensions. For the first time, Temasek’s exposure to China surpassed Singapore, increasing to 29% from 26% last year.
Exposure to the city-state fell to 24 percent from 26 percent a year ago. Meanwhile, its exposure to the North American market stood at 17% and in Europe at 10%.
Png Chin Yee, deputy chief financial officer and head of financial services at Temasek International, told the media that this is due to the relative valuations of the two markets. Looking at the market as a whole, MSCI China has outperformed Singapore by about 15 percentage points, he said.
He added that it is “quite natural” for Temasek to see much more exposure outside of Singapore given the smaller economy here compared to economies like the United States and China, but noted that Temasek will continue to invest in the local ecosystem.
New investments in China include Kuaishou Technology, a short video social platform; Beijing-Shanghai high-speed railway; and Ocumension Therapeutics, an ophthalmic pharmaceutical platform company.
Temasek is positive about China with the expectation that general policy will remain flexible to support economic and labor recovery.
Wu Yibing, joint director of the Business Development Group and director of China Temasek International, also noted that investment in China is geared towards domestic consumption and innovation, trends that have been accelerated by the pandemic.
In Singapore, the economy has seen a sharp contraction, Temasek said.
“Nonetheless, parts of the economy have shown resilience and continued fiscal support has helped support employment and ease pressures on businesses.”
Investments in Singapore’s growth companies include ShopBack and Growthwell Group, which makes plant-based meat alternatives.
Two-thirds of Temasek’s exposure is in Asia, led by China and Singapore in concentration.
In new Temasek investments, the US again accounted for the largest share during the year, followed by China and Singapore.
In the US, Temasek supported a management-led recapitalization at Eastdil Secured, a commercial real estate brokerage, and invested in the JAB Consumer Fund to increase exposure to the consumer sector.
Investments outperformed divestments during the year. Temasek invested about S $ 32 billion in assets and divested about S $ 26 billion in the same period.
He ended the year with a “resilient balance sheet,” said Temasek.
The net worth of the investment firm’s portfolio fell to S $ 306 billion, roughly 2.2% below the previous year’s S $ 313 billion based on the Singapore dollar conversion.
The impact of the pandemic on her portfolio was partially mitigated by a “tough private book” and a large cash balance entering the crisis, Ms Png said.
Temasek has increased its exposure to unlisted assets, and investments in private markets now account for 48% of its portfolio, up from 42% in 2019.
“In the past, private assets have generated stronger returns than our listed portfolio.
“They have outperformed and given us the illiquidity premium that we expect to get from investing in private space,” said Ms Png.
Its exposure to financial services remained the largest, standing at 23%.
Trends in the payments space, which are tied to e-commerce and digital payments, are here to stay, even in a post-pandemic world, Ms Png said.
Temasek increased its exposure to the payments sector and other non-bank financial services companies such as PayPal, Mastercard and Visa, to benefit from the acceleration in the digitization of financial services.
Technology, media and telecommunications continue to be areas of interest as well.
When asked about the company’s forecasts for next year, Ms Png said: “I’ll just say that we’ve seen a recovery in global markets since the end of March, so that should give you an indication of where they could. where are the market valuations and where could our portfolio valuations be today.
READ MORE: Sustainability at the center of everything we do, including investments: Temasek
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