Temasek portfolio value drops 9%; first slide in 7 years

SINGAPORE — The Republic’s investment firm, Temasek Holdings, reported its first annual decline in portfolio value since 2009 as volatile markets globally hurt the performance of its investments, and warned that lower returns continue to loom in the years ahead.

Temasek’s net portfolio value fell 9 per cent in the financial year ended March 31 to S$242 billion, down from S$266 billion in the previous 12 months, the company said in its annual review on Thursday (July 7). Financial and offshore and marine were two segments that experienced the “most significant declines in values”, it said. 

However, it ended the year in a net cash position. Dividend income was steady at S$8 billion, or about 18 times over interest expense. 

Its one-year total shareholder return was minus 9.02 per cent for the year, but over the longer 10-year and 20-year term, annualised returns were both 6 per cent.

“The equity markets around the world will remain susceptible to bouts of volatility in the short to medium term,” said Mr Michael Buchanan, 

Temasek’s head of strategy and senior managing director, portfolio strategy and risk group. “There is increased uncertainty, partly reflecting the ongoing hangover from the excesses that helped cause the global financial crisis. This suggests an environment of lower returns in the years ahead.” 

Temasek had more than half of its assets in China and Singapore, leaving it particularly exposed to a 21 per cent slump in China’s CSI 300 Index and an 18 per cent decline in Singapore’s Straits Times Index in the 12 months ended March 31, Bloomberg showed.

Analysts said given the uncertainties on the horizon, it has become more crucial for Temasek to be nimble in its investment approach in order to deliver steady dividend income to Singapore’s coffers. 

“The worry is the current environment may continue to put pressure on their existing portfolio, especially on the financial services side,” said Mr Song Seng Wun, economist at CIMB Private Banking. “There are plenty of risks over the horizon rather than risks diminishing.” 

He added that “there are plenty of opportunities as far as new economies, disruptive technologies go, but these things may have a short shelf life as well, so they have to be nimble.”

Temasek has been actively reshaping its portfolio for this purpose, its management noted on Thursday. In the past financial year, telecommunications, media and technology investments overtook financial services to be the largest sector in its portfolio at 25 per cent. 

And the company plans to open an office in San Francisco in September to target technology and life sciences companies, after taking stakes in firms such as PayPal and Airbnb. The United States accounted for the largest share of new investments during the year, followed by China. 

The firm also made a record divestment of S$28 billion during the year, capitalising on the liquidity-driven market rally earlier this year. This included offloading its majority interest in STATS ChipPAC, as well as positions in Cognizant Technology Solutions, Lloyds Banking Group and Kweichou Moutai. 

“The world is changing and where we used to make returns, we can’t be sure that they will continue to do that, so we’ve been actively reshaping our portfolio in the last five years,” said Mr Chia Song Hwee, president and joint head of investment group, portfolio management group and Singapore at Temasek. “The encouraging thing is, so far, the results seem positive, and hopefully this trend will continue. But with our portfolio size, it will take a while for the full effect to be felt. We will continue to make that transition and adapt our investments accordingly.”