TEMASEK said on Tuesday (Jul 12) that it expects its pace of invesment to slow down in its current financial year, amid a fragile global economy and geopolitical uncertainty.

The state investment firm reported during its annual Temasek Review that net portfolio value had grown S$22 billion over the last financial year to S$403 billion as at end March 2022. 

Temasek made investments of S$61 billion and divestments of S$37 billion during the financial year, resulting in net investments of S$24 billion during the year. Its level of investments were the highest since at least 2012.

Over the past decade, Temasek has made S$315 billion in investments and S$234 billion in divestments.

However, the pace of its investments are likely to slow in the coming year.

“Generally speaking, in view of the current environment, we expect to slow down our investment pace this financial year,” said Lim Ming Pey, managing director strategy office at Temasek International.

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She noted that the global economy is in a “fragile state”, citing uncertainties from the Russia-Ukraine conflict, fractured supply chains and tighter monetary policy from central banks to cope with inflationary pressures.

“Growth is slowing down and the risk of a recession is rising in key developed markets,” she said.

Temasek’s chief investment officer, Rohit Sipahimalani, also noted that the United States and Europe are in a bear market.

He said the decline in values in the US is almost entirely due to rising rates, but earnings decline has not been priced in yet.

“We think that is inevitable as we go through this year, so we see further downside in markets from that context,” he said.

For Europe, the situation is even more acute, he added. Apart from high inflation, slowing growth and tightening policy,the Russia and Ukraine crisis is also causing the energy crisis there.

China, on the other hand, is at the other end of the cycle, where it is early cycle and the risk-reward is more balanced. 

“But overall, I would say the profile, even in China, if you have a recession in the US and Europe, China will get impacted by that too,” Sipahimalani added, noting that the economic outlook is not looking very good, with further downside in the markets.

“Historically, when you have a bear market like this, you only trough after the Fed (Federal Reserve) has shown that it stopped tightening and is moving towards policy easing,” he added.

They do not see this happening quickly given the Federal Reserve’s current stance.

“We think this could be a prolonged downturn, extending to the end of the year, potentially sometime in 2023,” Sipahimalani said.