Temasek returned 12% in FY18, but warns of near-term risks

TEMASEK Holdings warned of increased near-term downside risks even as buoyant stock markets lifted its portfolio to a 12.19 per cent one-year return for the financial year ended March 31, 2018.

The Singapore government-owned investment firm's net portfolio value grew to a record S$308 billion, up from S$275 billion a year ago, according to its annual report released on Tuesday. A year ago, the portfolio returned 13 per cent.

The latest results came as key listed holdings posted strong gains over the year; market capitalisation grew 44 per cent for DBS Group Holdings, 91 per cent for Ping An Insurance and 73 per cent for Alibaba Group Holding.

Annualised returns over 20 years was 7 per cent, up from 6 per cent a year ago. Dividend income was S$9 billion for the year. Net profit improved to S$21 billion from S$14 billion a year earlier, Temasek said.

During the year under review, Temasek invested S$29 billion and divested S$16 billion. That reversed the net divestment stance in FY2017, when the firm put S$16 billion of funds to work but sold S$18 billion of assets.

But the pace of new investments could slow in the year ahead. Temasek expects global growth to moderate, with a probability of increased down risks.

"Given the market outlook, we may recalibrate and slow our investment pace over the next nine to 18 months," Temasek managing director of investment Alpin Mehta said.

The United States accounted for the largest share of new investments in FY2018, followed by China and Europe. The Americas and Europe now combine to make up almost a quarter of the portfolio, behind Singapore's 27 per cent and China's 26 per cent.

Since 2011 Temasek has been increasing its focus in the technology, life sciences, agribusinesses, non-bank financial services and consumer sectors. During the year, those focus sectors made up nearly half or S$13 billion of new investments. Its exposure in these focus sectors now make up about S$80 billion, or 26 per cent, of total portfolio, up from S$9 billion, or 5 per cent, of a smaller portfolio in 2011.

Temasek has a 60:40 underlying exposure to mature economies and growth regions. Singapore's share of the portfolio has slipped from 29 per cent in each of the past two years. China's share, however, has picked up fom 25 per cent in each of the past two years. North America, which represented a 10 per cent share in FY2016 and 12 per cent in FY2017, now forms a 13 per cent share of geographical exposure. Europe's share has also increased to 9 per cent from 8 per cent in each of the past two years.

Australia and New Zealand accounted for 7 per cent in FY2018, down from 8 per cent in FY2017 and 9 per cent in FY2016.