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Singapore's Temasek eyeing China for long-term investment

Publication Date : 09-07-2014


Temasek Holdings remains upbeat on China's investment prospects despite modest returns from key Asian markets last year even as it looks further afield to the United States and Europe.

Its China head, Wu Yibing, said at the firm's results briefing yesterday: "The growth rate is slowing, but stabilising at 7 per cent.
"There are some risks in the financial system, but the Chinese government has ample policy room and political will to deal with these challenges.

Structural and market reforms will bring longer-term benefits to the country and economy, although it may also bring some short-term disruptions.

"We continue to anchor ourselves in Asia, where we are positioned to capture the long-term growth benefits."

The US and Europe are showing signs of improvement, he noted.
"Europe has good companies with solid fundamentals.
North America continues to be a centre-stage for innovation, and we continue to see companies with comparative advantages emerging, (which) will lead to opportunities in energy, resources, life-sciences and technology," he added.

Indeed, investments in companies such as Chinese e-commerce giant Alibaba are examples of "long-term positions taken to leverage some of the key trends transforming the retail, health-care, education and utilities sectors", Rohit Sipahimalani, co-head of Temasek's investment group and India head, said.

"It reflects our focus on technology as a key investment theme going forward."

Asia accounted for half of Temasek's S$24 billion (US$19.3 billion) in new investments in the 12 months to March 31, followed by North America and Europe, with a combined 40 per cent share.

"In the US, the economy is improving and should continue to grow at a slow pace," Wu said.

"Unlike last year, the recovery of consumer confidence is increasing, and the removal of the fiscal drag contributed to overall growth.

"Job addition has been strong this year, but this will lead to eventual tightening of monetary policy, which will have consequences for many markets and economies.

"On Europe, we believe the risks have reduced significantly. But with continued deleveraging coupled with fiscal austerity, we would expect weak conditions in Europe for some time to come."

Notably, 61 per cent of Temasek's portfolio is denominated in Singapore dollars.

Singapore and China remain the two largest areas by underlying assets - Singapore at 31 per cent and China at 25 per cent - followed by Australia at 10 per cent.

Temasek's exposure to North America and Europe grew from 12 per cent to 14 per cent in the last financial year, driven by investments in life sciences, financial institutions, technology, media and telecommunications.

The firm made divestments of S$10 billion (US$8.04 billion), making a net investment of S$14 billion (US$11.26 billion) in the year to March 31 - the highest since the global financial crisis in 2008.

Financial services, life sciences, energy and the consumer sector were among top picks.

Temasek's portfolio remained heavily weighted in favour of financial services at 30 per cent, down from 31 per cent in the previous financial year.

It increased its stake in the AIA Group and lifted its H-share stake in Industrial and Commercial Bank of China (ICBC) to 8.9 per cent as part of a portfolio rebalancing among Chinese banks.

The firm invested S$1.24 billion (US$1 billion) in Gilead Sciences, a US-based biopharmaceuticals company, and S$2 billion (US$1.61 billion) in Pavilion Energy.

It also made a US$150 million commitment to Seven Energy in Nigeria, an oil and gas producer.

Temasek also stepped up investments in the consumer sector towards the end of the financial year, putting in US$5.7 billion in A.S. Watson, a global health and beauty retailer, and made a voluntary cash offer for commodities trader Olam International, raising its stake to 58.5 per cent.

Meanwhile, key divestments included part of Temasek's holdings in Bharti Telecom and Seoul Semiconductor, as well as its stakes in Tiger Airways, Cheniere Energy and Youku-Tudou.

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