Temasek Reports Worst 7-Year Return Rate, Says China Still Offers Investment Opportunities

According to Zhongtong Finance APP, Temasek Holdings, the Singaporean sovereign wealth fund, has publicly disclosed its worst return rate since 2016. It has also warned that it has started to slow down its investment pace against the backdrop of economic recession risks, rising interest rates, and geopolitical tensions.

As one of the world's largest and most active investors, Temasek pointed out that the decline in public and private equity capital markets, especially the impact on the technology industry, has reduced the net value of its investment portfolio to SGD 382 billion (USD 285 billion) in the fiscal year ending in March.

In contrast, Temasek's investment portfolio value reached a record high of USD 403 billion in 2022. The accounting method based on market price resulted in a loss of SGD 7 billion.

Temasek's investments in the Asian region account for two-thirds of its investment portfolio, and it has invested in some of the world's largest startups, such as Ant Group and the payment processing group Stripe in San Francisco and Dublin. The company reported a total shareholder return rate decrease of 5.07%, which is in stark contrast to the 5.8% growth of the previous year and far below the 24.5% growth in 2021. Temasek's total return rates for 10 and 20 years are 6% and 9%, respectively.

Global investors are struggling to adapt to the new normal of rising interest rates. Temasek's cost of capital has increased from 7% to 9%.

The decline in return rates makes this the worst annual performance since 2016. Temasek's investment returns, along with those of sovereign wealth fund GIC and the Monetary Authority of Singapore, are the main sources of Singapore's budget.

Rohit Sipahimalani, the company's Chief Investment Officer, said, "The global economy remains quite fragile, and there are no signs of easing geopolitical tensions."

Over the past decade, Temasek's holdings of unlisted company stocks have grown significantly, accounting for more than 50% of its investment portfolio. Temasek was forced to write down its investment of USD 275 million in the bankrupt cryptocurrency exchange FTX. Dilhan Pillay, Temasek's CEO, admitted that this investment has caused significant reputational damage to the company, but he described it as an "aberration."

Sipahimalani stated that Temasek is slowing down its investment pace and taking a "geopolitical perspective" on transactions.

The management pointed out that in the long run, industries related to domestic consumption and electric vehicles still have opportunities in China, but the growth prospects are not clear. "We expect (the government's) stimulus policies to be much lower and more moderate than what we have seen in the past." In the past decade, China's share in the Temasek portfolio has remained stable. In 2013, China accounted for 23% of the portfolio, and by 2023, this proportion decreased to 22%, while the Americas' share increased from 10% to 21%. Singapore is Temasek's largest investment destination, accounting for 28%.

Temasek has expressed its intention to seek increased investments in India and Southeast Asia. The company believes that diversification of the supply chain, including the digital economy, will bring new opportunities.