Temasek Holdings Singapore office logo.
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Singapore’s Temasek said on Tuesday that most of its investment capital will continue to flow to the United States, with the country’s investment firm focusing on early adopters of artificial intelligence in the country’s traditional industries.
Rohit Sipahimalani, Temasek’s chief investment officer, told CNBC that while U.S. stocks overall look expensive, the S&P equal-weighted index trades at just 16 times earnings, below its long-term average .
Temasek did not give a specific breakdown of its exposure to U.S. assets but said the Americas accounted for 22% of its portfolio.
The company’s portfolio value grew nearly 2% to 389 billion Singapore dollars ($288 billion) in the year to March, adding that it was cautious about the Chinese market.
The report pointed out that although the Chinese government’s stance on promoting growth is conducive to economic recovery, the economy still has structural challenges. If domestic demand does not increase, China’s economy and inflation rate will continue to face downward pressure.
Temasek Deputy Chief Executive Officer Xie Songhui said that the challenges faced by China largely come from the demand side of the economy.
Chia said companies that “drive domestic consumption or feed domestic consumption” such as those in biotech, robotics and the electrification and electric vehicle value chain will be interesting.
He added that while some of these businesses have export potential, the company is actually looking for companies that can only rely on the domestic market and rely less on exports to other countries due to geopolitical risks.
Overall, Temasek will remain cautious and will continue to monitor government policies in the world’s second-largest economy, the state investor said. Chinese assets account for 19% of Temasek’s portfolio, down from 22% in fiscal 2023.
The company is also looking to invest in Japan, where foreign investor interest has risen as the market surged to record highs this year.
Alpin Mehta, deputy head of private equity investments at Temasek, explained that Japan’s corporate world continues to benefit from structural and cyclical tailwinds due to corporate governance reforms.
“We’ve seen an increase in Japanese private equity activity over the past few years and these are some of the funds from our investors. So the idea is to invest alongside them, co-invest with them.”
Temasek’s exposure to Japan has risen from “almost zero a few years ago” to 1%, Mehta said, adding that it was still in the “early stages”. He pointed out that some of Temasek’s portfolio companies have operations in Japan, such as Vertex Capital, as well as property companies CapitaLand and Mapletree Group.
The company does see opportunities in India due to its large domestic market and diversified supply chains, but also in Europe’s green energy transition.
In fiscal year 2024, Temasek has invested S$26 billion in areas such as technology, financial services and healthcare.
Outside of Singapore, most of Temasek’s investment funds go to the United States, followed by India and Europe.
portfolio performance
After accounting for unlisted assets, Temasek’s net mark-to-market portfolio value reached S$420 billion, up from S$411 billion the previous year.
Temasek said it chose to publish this indicator because unlisted assets accounted for the majority of its investment portfolio, rising from 20% in 2004 to 52%.
“We’ve found over the last decade that we have more advantages on the private side just because it depends on us having better access, how we work with these companies and so on,” Sipashimalani said.
He explained that the company does not have a target ratio of unlisted to listed assets in its portfolio but will invest when it identifies suitable opportunities.
“We need to maintain a balance of liquidity and private assets. So they are always balanced, but we don’t have a specific target. I think we are pretty satisfied,” he added.
While Temasek’s one-year TSR only grew 1.6%, up from a 5% decline in 2023, Temasek’s 10-year TSR was steady at 6%, while the 20-year indicator edged down from 9% dropped to 7%.
This is due to the exclusion of fiscal 2004, when the post-SARS pandemic one-year total shareholder return was 46%.
Separately, the company divested S$33 billion in the current financial year, bringing its net disinvestment to S$7 billion, compared with S$4 billion in net investments a year ago.
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