<![CDATA[In Singapore, Temasek's results spark discussion of Chinese investments and Ho Ching]>
When Temasek Holdings announced its results early last month, there was no hiding the stark fact that Singapore's state investment firm was feeling the full effects of the ongoing US-China trade war.
Shareholder returns plunged to 1.49 per cent, down from 12 per cent year on year, and its portfolio value in Singapore dollar terms rose to S$313 billion (US$230.1 billion) as it made divestments of S$28 billion, compared with new investments of S$24 billion.
Beyond these top-line figures, however, Temasek appears to be following its time-tested strategy of betting big on new trends rather than sticking to old economy behemoths.
Overall, just over half of its investments are in financial services; the telecommunications, media and tech sectors; and life sciences and agribusiness. In its investments in China and India, the emphasis has been on tech companies and life sciences.
Chinese investments make up 26 per cent, or S$81.4 billion, of Temasek's total global portfolio, while Indian investments make up 5 per cent of the total. For the first time, Chinese investments are on par with Singaporean investments.
Temasek's focus on China has mirrored the country's transformation from an export-led economy to one focusing on domestic consumption and services, according to executives.
Png Chin Yee, Temasek's senior managing director for the portfolio strategy and risk group, said: "When we first went into China a lot of that was in the banks, and in recent years, we've [also been involved in] insurance ... consumer, technology, life sciences."
It has pumped funds into co-working space provider WeWork China, as well as Ant Financial, an affiliate of Alibaba, the parent of the South China Morning Post. Ant Financial operates mobile payment platform Alipay.
A person buys medication through an Alipay face-scanning service at a 'future drugstore' in Zhengzhou, Henan Province. Photo: Xinhua alt=A person buys medication through an Alipay face-scanning service at a 'future drugstore' in Zhengzhou, Henan Province. Photo: Xinhua
Despite Temasek's "solid" Chinese investments, Daniel Brett, head of data and research at the Sovereign Wealth Centre, noted that the organisation's strategy of looking to co-invest with local partners and sovereign investor peers appeared to indicate its caution over risks associated with the US-China trade war.
"Nervousness is tempered by the fact that China's market size, potential and continuing development provide opportunities that cannot be ignored," Brett said.
Temasek also invested US$300 million last month in Hong Kong-based global supply chain giant Li & Fung's logistics business, reaffirming its growing interests in global suppliers in consumption-driven economies. Brett said China's pharmaceutical and biotech industries were "leading targets" for Temasek and GIC, Singapore's sovereign wealth fund.
Temasek has invested in BeiGene and Innovent Biologics, which develops therapies and antibodies for diseases such as cancer, as well as Gracell Biotechnologies, a cell therapy company.
Chia Song Hwee, Temasek's president and chief operating officer, described the advancement in life sciences in China as "quite remarkable", adding that the Chinese companies have succeeded in attracting non-Chinese local clients, from the US and Europe.
When asked if Temasek was concerned about Chinese laws that could tamper companies' growth, such as a March draft proposal that would allow hospitals to sell therapies without approval from the authorities, Chia said drug laws were "very stringent" in China.
"The Chinese [food and drug administration] standard is no less stringent than the rest of the world. So, we also rely and take comfort in that," he added. "The level of innovation ... both at a company level and the government agencies, have allowed this progress to be made and is actually very encouraging."
A scientist works at a laboratory at BeiGene's R&D centre in Beijing. Photo: Bloomberg alt=A scientist works at a laboratory at BeiGene's R&D centre in Beijing. Photo: Bloomberg
Responding to journalists at Temasek's press briefing on whether its Chinese investments would overtake those in Singapore, Chia said there was no set target on particular markets. But China's sheer size represented more opportunities, he said.
Brett from the Sovereign Wealth Centre said the decline in Temasek's exposure to Singapore assets " from 27 per cent to 26 per cent a year earlier " could be explained by a decrease in the value of the assets, given the city state's gloomy GDP growth predictions on the back of a deteriorating global economy.
"There is a possibility that, once the Singaporean economy recovers, Temasek will see its Singaporean assets rise in importance in its portfolio as asset value recovers," he said, adding that Indian acquisitions may offer more long-term gains.
Temasek's investments in Asia now make up 66 per cent of its portfolio, with the US accounting for the largest share outside Asia at 15 per cent, up from 13 per cent in the previous year. It has investments in food delivery marketplace DoorDash and agriculture analytics platform Farmer's Business Network.
Dilhan Pillay, chief executive officer of the state investor's investment arm, Temasek International, said it would increase its exposure in unlisted companies for future growth. "Investments in this space have generally performed well and provided us with better returns than listed ones since 2002," he said.
Brett said the Chinese market would remain a "central part of Temasek's growth aspirations", pointing to how it had hired Goldman Sachs' former chief Chinese economist MK Tang for its portfolio strategy and risk group.
Song Seng Wun, an economist at CIMB Private Banking, believes it is inevitable that Temasek's China investments would at some point outpace those in Singapore.
"Whether you are a manufacturer, a service provider or a fund manager looking to invest directly, you would look to China for opportunities," he said, citing factors such as China's large population, growing middle class, and its strong push to use technology in all aspects of daily life. "At the end of the day, it's about where to make money from and in this environment where there is low inflation and low interest rates, it makes the investment case for China more compelling."
Temasek Holdings' chief executive officer, Ho Ching. Photo: Reuters alt=Temasek Holdings' chief executive officer, Ho Ching. Photo: Reuters
But even as these stark facts were discussed when Temasek released its annual results last week, some figures remained opaque " a detail pointed out by Lee Hsien Yang, the estranged younger brother of Prime Minister Lee Hsien Loong, the next day.
In particular, the younger Lee on Facebook asked why the salary of Temasek Holdings' chief executive officer Ho Ching, the wife of the prime minister, was not disclosed.
"Why is it such a big secret?" he posted, as he shared an article by Singapore news site The Independent speculating that Ho earned about S$300,000 a day, echoing earlier calls by opposition politicians for the figure to be released in the name of transparency, even though the firm is not required to publish its CEO's earnings under the Singapore Companies Act.
Lee Hsien Yang has in recent months publicly backed a new political party pledging to take on the incumbent People's Action Party, which controls almost all of Singapore's parliament, in the nation's next general election which must be held before April 2021.
He and his younger sister have for the past few years been locked in a bitter feud with their brother, the prime minister, over the final will of their father, Singapore's founding leader Lee Kuan Yew.
At Temasek's press briefing, Ho's name came up when a reporter asked about her role in the company and what plans the organisation had for leadership succession. Temasek International CEO Pillay said Ho was "very much now involved in the stewardship aspects of Temasek ... she still keeps a watchful eye over all of us to make sure we continue to do the right thing".
This article originally appeared on the South China Morning Post (SCMP).
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