Singapore’s state-owned investor Temasek Holdings is augmenting its focus on India as China’s public market continues to suffer a slow recovery.
The firm, which last year posted a S$7-billion loss for the first time in years, saw its one-year shareholder returns swinging back to positive—to around 2% in Singapore dollar terms—for the year ended March 31, 2024. Its net portfolio value rose S$7 billion from the previous year to S$389 billion thanks to the returns from its holdings in the US and India, which offset the underperformance of China’s capital markets.
One-year returns back to positive
Public and private market investors in the past years have been rebalancing their allocation to China and rerouting money to other parts of Asia, with India, North Asia, and Southeast Asia being among the major beneficiaries.
Temasek, one of the world’s largest institutional investors, is also taking a similar road with plans to double down on India, betting on its growing domestic market and businesses, while taking “a cautious approach” and monitoring government policies in China this year, said Temasek International’s head of financial services Connie Chan in a press briefing in Singapore on Tuesday.
Adjustments in geographic exposure
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| Singapore | 27 | 28 | 27 |
| China | 19 | 22 | 22 |
| India | 7 | 6 | 6 |
| Asia Pacific (ex Singapore, China & India) | 12 | 11 | 12 |
| Americas | 22 | 21 | 21 |
| Europe, Middle East & Africa | 13 | 12 | 12 |
“India has continued to see strong economic momentum alongside improving macro and political stability. Its growth will be driven by infrastructure-led capital expenditures and private consumption. They also benefit from supply-chain diversification. We also see India emerging as a key geopolitical player. We see long-term potential in financial services, consumer as well as the healthcare sector,” Chan commented.
Sectoral breakdown
| 2024 | 2023 | 2022 | 2021 | 2020 | |
|---|---|---|---|---|---|
| Transportation & Industrials | 22 | 23 | 22 | 19 | 18 |
| Financial Services | 21 | 21 | 23 | 24 | 23 |
| Telco, Media & Technology | 18 | 17 | 18 | 21 | 21 |
| Consumer & Real Estate | 15 | 16 | 15 | 14 | 17 |
| Life Sciences & Agri-Food | 9 | 9 | 9 | 10 | 8 |
| Multi-Sector Funds | 9 | 8 | 8 | 8 | 8 |
| Others (including Credit) | 6 | 6 | 5 | 4 | 5 |
DealStreetAsia reported in February that the Singaporean investor is in preliminary discussions to invest in India-headquartered medical equipment firm Tynor Orthotics after buying additional shares to become the largest shareholder for local hospital chain Manipal Health in 2023.
Explaining the caution about the China market, Song Hwee Chia, deputy CEO of Temasek, said the performance landscape has changed since two decades ago when the firm ramped up its exposure to China, particularly with the slower-than-expected recovery post-COVID-19.
“That’s the reason why we’re allocating more to developed markets and also increasing our focus on India to address periodic market changes that may not be in our favour. That portfolio is still young and has not been able to generate the return to offset the pressure that we’re getting from China. Given the size of our portfolio, as we try to adjust it, we will not see the result immediately,” he addressed.
Meanwhile, Temasek is also looking to increase its exposure to Southeast Asia and Japan, where Temasek’s deputy head for private equity fund investments Alpin Mehta is seeing bright spots in public and private markets.
“Over the last couple of years, we’ve seen a pickup in private equity activities in Japan. These are some of the funds that we have invested with, so our idea is to invest alongside them through co-investments. We’ve also been increasing our overall exposure to Japan through capital markets, etc.,” said Mehta, who added that the country accounts for roughly 1% of its overall portfolio.
In May, Temasek anchored the launch of Vertex Ventures’ 10-billion-yen ($64 million) venture capital fund which invests in early-stage and high-growth Japanese companies.
Along with the heightened interest in select Asian markets, Temasek continues to see the US attracting the biggest portion of its money.
“We see the US as a very deep market with a lot of innovation, so that’s a good place for our capital,” added Chin Yee Png, Temasek’s Chief Finance Officer.
Private assets
Temasek also expressed its bullishness on private assets thanks to an outperformance compared to public markets.
“We’ve been able to achieve premiums on the returns of our private assets over the years,” Png claimed.
The investor’s unlisted portfolio has grown from 20% of the total portfolio in 2004 to 52% as of March 31, 2024, delivering a 9% 10-year IRR versus 6% overall.
Its unlisted portfolio consists of its direct investments in private companies (35%), holdings in local companies (31%), asset management businesses (14%), and private fund investments (20%), which Chan said to have performed “very good.”
The latest fiscal year is the first time Temasek has marked its unlisted portfolio to market, which would provide S$31 billion of value uplift and bring its mark-to-market net portfolio value to S$420 billion, up S$9 billion from the previous year.