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TEMASEK REVIEW 2019

Temasek posts 1.49% one-year return; divestments outpace investments

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During the year under review, Temasek shifted into divestment mode, divesting S$28 billion in assets, and investing about S$24 billion in the same period.

TEMASEK Holdings on Tuesday reported a one-year total shareholder return (TSR) of 1.49 per cent for the 12 months ended March 31, 2019, reflecting market volatility as it warned of lower returns expectations for the longer term amid weak global growth.

This compared with the 12.2 per cent TSR posted in the year-ago period, with TSR a compounded and annualised measure that includes dividends paid to its shareholder but that excludes its shareholder's capital injections. Compounded over 45 years since its inception in 1974, annualised returns stood at 15 per cent.

The Singapore investment firm's net portfolio value grew to S$313 billion, up from S$308 billion a year ago on a Sing-dollar conversion basis, it said in its annual report released on Tuesday. 
 
During the year under review, Temasek shifted into divestment mode, divesting S$28 billion in assets, and investing about S$24 billion in the same period. Temasek had guided a year ago that given the market outlook, it may recalibrate and slow its investment pace over the next nine to 18 months. 

Temasek received dividend income of S$9 billion from its portfolio. 

Temasek said that equity markets have been volatile for the past year and a half.

"Concerns remain around escalating tensions, especially between China and the US. These tensions may further moderate global growth. We also remain watchful around the risks of a late cycle recession in the US, while Brexit and political fragmentation continue to weigh on Europe."

Meanwhile, the outlook in China may come under more pressure from a prolonged standoff with the US, though possibly mitigated by its awareness of macro risks and policy headroom.

"Overall, we remain optimistic on China’s trajectory in the medium term, on the back of timely and targeted reforms to transition the economy towards a more sustainable growth path."

In Singapore, activity is moderating alongside global growth, with increasing downside risks from global tensions, Temasek said. "However, the potential of increased trade and investment into the growing Asean region could favour Singapore in the long term. We also expect some segments of the economy, including professional, financial and technology services, to remain resilient."

In a media statement, Png Chin Yee, senior managing director, portfolio strategy and risk group, said: “While the increasingly challenging global environment may dampen business confidence and investment, we expect policymakers to be primed for dovish policies that could cushion any substantive pressure on growth. If growth continues to be weak, the low interest rate environment is likely to persist into the foreseeable future. This could lower returns expectations for the longer term.”

As at March 31, 2019, Temasek had the same geographical exposure to Singapore and China, at 26 per cent each. Its exposure to the North American market stood at 15 per cent, and that in Europe at 10 per cent.

Geographically, the US again accounted for the largest share of Temasek's new investments during the year, followed by Europe and China.

Its exposure to financial services remains the largest, and stood at 25 per cent. Temasek holds stakes in DBS Group Holdings and Standard Chartered. 

Temasek said it would continue to focus on non-bank fintech and payments platforms such as Ant Financial in China that operates the flagship Alipay payments platform, and Global Payments, a global payment solutions provider. 

Technology, media and telecommunications, particularly technology, remains a key investment focus. Some of its new investments include North American companies such as UST Global, a digital solutions provider, and DoorDash, an online food delivery marketplace; OlaCabs, an online ride-hailing company in India; and Bionexo, a Brazilian healthcare e-commerce company. 

In stepping up its divestment pace, key divestments by Temasek included Gilead Sciences, Cargill Tropical Palm and Klabin. It continues to maintain significant holdings in Alibaba, CenturyLink and IHS Markit, even as it shed some stakes to rebalance its portfolio. Temasek's divestment of Bank Danamon was completed after March 2019.