The already heavy exposure to Asia of the S$186 billion ($134 billion) Temasek Holdings will be increased over the next decade as the investor favours the long-term secular growth of Asia over global growth.
“Directionally, we are likely to increase our exposure to Asia over the next decade, but will continue to maintain the full flexibility to shift our portfolio stance in response to major development, trends or market opportunities,” executive director of Temasek, Simon Israel, said.
Temasek has been an active investor in Asia since 2002, and in the year to March 2010, nearly 80 per cent of the underlying portfolio exposure was in Asia.
That included about 32 per cent in its native Singapore, while the rest of Asia, excluding Japan, stood at 46 per cent; and OECD and other economies at 22 per cent.
In its annual performance report and institutional review, Temasek Report 2010 – Making a Difference, it said “the European sovereign debt crisis points to the underlying structural imbalances and the bumpy re-adjustments ahead as past excesses are still being worked through”.
It quoted downside risks as inflation in the medium-term, as well as political, policy and regulatory risks in the near-term, and the potential cracks in the global credit system.
Chief executive of Temasek, Ho Ching, said: “We expect global growth to be slower in the medium-term with Asia maintaining its secular long-term growth. Our focus on Asia will continue.”
Temasek, which has had steady long-term returns of 17 per cent compounded annually since inception, takes a long view of its investment position, regularly reviewing and rebalancing.
“Since mid-2007, we have maintained the flexibility of remaining in cash and kept a steady investment pace. This followed from our early 2007 assessment of increasing medium-term geo-economic risks and signs of bubbly market conditions. By mid-2007, we stepped up our monetisation, and prepared to stay on the sidelines going into 2008,” she said.
Indeed Israel said a focus on the long-term nature of investments, as well as keeping a cool hand, helped ride the investment waves of 2007-2009.
“We maintained a liquid posture, kept our powder dry, made sure the home base was secure, and invested and divested steadily, taking advantage of opportunities which came along,” he said.
In the past financial year Temasek made about $7 billion in new investments and $4.3 billion of divestments. This included more than $2 billion of rights issues in and recapitalisations of its portfolio companies to enhance their financial flexibility.
This included the rights issue of Bank Danamon and Chartered Semiconductor Manufacturing in April, Neptune Orient Lines in July and CitySpring in September 2009, and a $1 billion injection into Singapore Power
New investments range from a platinum producer in South Africa, to a Canadian-listed oil and gas company, an LED manufacturer in Korea and an innovative biotechnologies company in Brazil.
It also established SeaTown Holdings, the wholly-owned global investment company with committed capital of more than $3 billion, bilateral co-investment rights between Temasek and SeaTown, and the potential for third-party co-investment in the medium term.