SINGAPORE – Singapore’s state-owned investment company Temasek posted its worst returns in seven years in 2023, weighed down by a challenging macroeconomic and geopolitical environment.
Temasek’s one-year total return to Singapore dollar shareholders fell 5.07% in the fiscal year ended March 31, according to a statement released Tuesday. This was Temasek’s worst annual shareholder return since 2016 and only its fifth annual negative return since 2003.
“We have a mostly stock portfolio, so we cannot be immune to market movements,” Rohit Sipahimalani, Temasek’s chief investment officer, told CNBC.
Temasek’s net portfolio value was S$382 billion (US$287 billion), compared to S$403 billion a year ago. The company also posted a $6 billion net loss, its first in at least a decade.
Still, the decline in Temasek’s annual shareholder returns in 2022-23 compares relatively favorably to global stock market returns.
Temasek Holdings saw a 5.07% decline in one-year total return to Singapore dollar shareholders for the fiscal year ended March 31, 2023, according to a statement released on Tuesday. Net portfolio value was S$382 billion compared to S$403 billion a year ago. This was only the fifth year-long negative total return for shareholders since 2003.
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The S&P 500 and MSCI Asia ex-Japan benchmarks each fell nearly 20% in 2022, battered by stubborn inflation despite multiple rate hikes by central banks. Rising geopolitical tensions, such as tensions between the US and China and the war between Russia and Ukraine, also added to the unprecedented complexity.
“For the future… it depends on how the market develops. We would hope to be more resilient than the market,” he told CNBC’s Sri Jegarajah. “When the market recovers, you know we’re going to do well. And if not, then hopefully we’ll still build a portfolio that’s geared not to a one-year perspective, but to a five- to ten-year perspective.”
Singapore’s state investor invests in both public and private markets. As of March 31, unlisted assets accounted for 53% of the portfolio – resulting in higher returns for listed assets. The market valuation of its unlisted portfolio would bring an increase in value of 18 billion Singapore dollars, it said.
The total return to shareholders over three years was 8%, while the 10-year return was 6% and the 20-year return was 9%.
portfolio adjustments
The confluence of multiple global events over the past year has increased the cost of capital and weighed on capital flows, the Singapore state-owned investor said.
“This has also impacted the pace of the energy transition given greater demand for energy security and resilience,” Temasek added.
Temasek said that its global direct investments, particularly in technology, healthcare and payments, saw a “reversal in gains” in the 12 months ended March 31 as valuations softened in an environment of higher interest rates.
Temasek said the company slowed its pace of investment last year as a result, taking a cautious approach given tighter liquidity. Invested $23 billion while divesting $20 billion, resulting in a net investment of $3 billion.
Still, Temasek said it made new investments in payments platform Stripe, as well as IT security provider Kaseya. This investment, in turn, enabled the acquisition of Datto, a provider of security and cloud-based software solutions.
Temasek said it increased its stake in Mastronardi, a Canada-based company that grows and sells greenhouse-grown fresh produce.
Singapore’s state investor said it reduced its portfolio share in financial services to 21% in 2022/23 from 23% last year and also increased its share in transport and industrials from 22% to 23%. These two sectors are the largest in their investment portfolio.
Early-stage investments are capped at 6% of the portfolio, Temasek said.
forward guidance
In November, Temasek wrote off its $275 million investment in bankrupt cryptocurrency exchange FTX.
The company then cut compensation in May for the team that recommended its investment in now-bankrupt cryptocurrency exchange FTX, as well as for its senior management team.
“I would say we have never tried investing in cryptocurrencies,” Sipahimalani said.
“There is a lot of regulatory uncertainty in this environment,” he added, saying it is “very difficult” for Temasek to make another investment in cryptocurrency exchanges.
Sipahimalani said the state-owned investor is aiming for greater portfolio resilience to market volatility induced by the current global complexities.
India and Southeast Asia are geographic areas where Temasek plans to increase investment, he said.
“India now accounts for about 5% of our portfolio. We want to expand this share and have increased our investments in recent years,” said Sipahimalani.
“Southeast Asia is even smaller, we want to enlarge that compared to India. The size of the public markets is not that big. So it’s harder to find scale-scale ways to do that,” he added. “But we are actively working on that.”
He referred to Vietnam, which he believes will benefit disproportionately from the regionalization of supply chains.
Sipahimalani also said that any recession would bring investment opportunities for Temasek.
“We think you probably need a recession to bring inflation down to acceptable levels,” the CIO said.
“Actually, I think any recession will be mild because of strong consumer and corporate balance sheets. And I think that would be an investment opportunity for us if you see that.” [market] Corrections.”
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