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WEAKNESS in listed investments, particularly in China and financial services, dragged Temasek Holdings' net portfolio value lower by 9.02 per cent to S$242 billion in 2016, its first negative return since 2009.
Over a three-year period, Temasek's total shareholder return was 3.25 per cent in Singapore-dollar terms. Over a 20-year period, total shareholder return was 6 per cent.
The decline came mostly from mark-to-market valuations of listed assets. Temasek is especially exposed to the stock markets of Singapore, which fell 15 per cent over the same period, and Hong Kong, which dropped 26 per cent.
China's representation in Temasek's portfolio shrank to 25 per cent from 27 per cent, one of the more notable declines in terms of geography, largely due to a drop in marked-to-market values of listed investments.
Telecommunications, media and technology became the largest single industrial sector in Temasek's portfolio, growing to 25 per cent from 24 per cent, as Temasek continued to grow its investments in technology businesses. The share of financial services fell to 23 per cent from 28 per cent, from first to second place, as banks underperformed. But Temasek's investments in non-bank financial services outperformed the rest of its portfolio.
Temasek divested S$28 billion of assets during the year, and invested S$30 billion. The United States accounted for the largest share of new investments around the world. In Asia, China received the largest share of new investments. New investments during the year included PayPal, Citic Securities and WuXi PharmaTech.
Temasek will be deploying new resources to the technology sector, with a new office in San Francisco to open later in the year.
"Our new office in San Francisco will give us a good window to tech-related investment opportunities in Silicon Valley," Temasek International chief executive Lee Theng Kiat said in a statement.
Looking ahead, Temasek expects modest but on-track growth in the US and a successful transition in China towards a "more sustainable growth path in the medium term".
Michael Buchanan, Temasek's head of strategy, expects bouts of volatility in the short to medium term in equity markets.
"The equity markets around the world will remain susceptible to bouts of volatility in the short to medium term," he said. "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 year ahead. However, Temasek is well positioned financially to address both the opportunities and challenges for the longer term."