Singapore state-owned investor Temasek on Tuesday reported a USD 6 billion net loss for the year through March, as it warned global economic and geopolitical headwinds are weighing on investment activities.
The company, which answers to the city-state’s finance minister as its sole shareholder, also said it logged a one-year total shareholder return of minus 5.07% in Singapore dollar terms, compared with a positive 5.81% annual return a year ago. It last saw a negative return, of minus 2%, in 2020.
Temasek said the USD 6 billion figure came largely from paper losses booked as a result of a downturn in equity markets over the past year, as well as new accounting principles it adopted in 2018. If those principles were applied to previous years, the company said, it would have also booked losses in 2016 and 2009.
“As a predominantly equity portfolio, we will not be immune to market cycles,” Rohit Sipahimalani, Temasek International’s chief investment officer, said at a news conference on Tuesday. “It’s very difficult for us to predict where the markets will be. What we have been trying to do is have a resilient portfolio and do better than the markets.”
The company said overall its portfolio continued to recover from lows hit during the COVID-19 pandemic, despite the falls in valuations in areas such as technology, health care and payments that led to the net loss. It added that a number of factors over the past year have raised the cost of capital and weighed on capital flows, including persistent inflation, intensifying geopolitical tensions and the Russia-Ukraine war.
Sipahimalani also addressed the company’s ill-fated investment in FTX.
Temasek wrote down its entire USD 275 million stake in FTX after the cryptocurrency company’s collapse. Across two funding rounds from October 2021 to January 2022, it invested USD 210 million in FTX International and USD 65 million in FTX US, both for minority stakes.
An independent team conducted an internal review of the investment, and Temasek in May said it had reduced the compensation of its investment team and senior management following the failed bet.
“We invested in FTX because at that time it seemed like the company [had] good technology, [and] it was gaining market share,” Sipahimalani said. “Clearly there has been a situation of fraud there we are very disappointed about.”
He said Temasek has learned from the experience but investing in such companies will always entail some level of risk: “It’s impossible to always discover fraud no matter how much due diligence that we do.”
Temasek, one of the world’s most prolific institutional investors, saw its net portfolio value shrink to SGD 382 billion (USD 287 billion) from a record SGD 403 billion (USD 305 billion) a year earlier as it invested SGD 31 billion (USD 23 billion) and divested SGD 27 billion (USD 20 billion).
By country, Singapore remains its top investment destination, with assets there comprising 28% of its portfolio. China came second at 22%, followed by the Americas at 21%. Temasek’s portfolio remains largely based in Asia, which makes up 63% of its holdings.
In China, Temasek has backed e-commerce giants Alibaba Group and Tencent Holdings, and ride-hailing company Didi Global, all companies exposed to Beijing’s regulatory crackdown on alleged anti-competitive practices.
It has also backed Chinese financial technology player Ant Group, which last week was fined CNY 7.12 billion (USD 993 million) for violating laws concerning consumer protection and corporate governance. It is one of the largest-ever fines for an internet company in China.
Temasek said the news is a positive development, as it may mark the end of Ant’s regulatory woes. “Hopefully this draws a line in the sand,” said Png Chin Yee, Temasek’s chief financial officer, during the Tuesday news conference. “Once this is behind [them], they can maybe focus on stabilizing and growing.”
Beyond China, Temasek said it intends to increase its focus on India and Southeast Asia. In India, new investments for the company include Country Delight, a subscription-based platform for food essentials. It also recently acquired a 41% stake in Manipal Health Enterprises, an Indian hospital chain.
Temasek said Southeast Asia offers attractive investment opportunities thanks to the region’s strong economic fundamentals and favorable demographics. It has invested in Vietcombank, the largest commercial bank in Vietnam by market capitalization, and Waresix, an Indonesia-based digital truck brokerage platform.
Amid global headwinds, however, the Singapore investor says it will be careful about further bets.
“We maintain a cautious investment stance and expect to invest at a moderated pace this financial year, given the challenging macroeconomic environment,” Sipahimalani said. “However, given our strong liquidity position, we are ready to step up our investments in a market correction.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.