TEMASEK turned in a one-year total shareholder return (TSR) of 1.6 per cent for the financial year ended March 31, reversing the previous year’s negative showing. However, the recovery was hampered by the weak China market.
The figures were unveiled on Tuesday (Jul 9) at the launch of the annual Temasek Review, which covers Temasek’s performance overview, performance highlights as well as its group financial summary for the latest financial year.
On a 10-year basis, Temasek’s TSR remained unchanged at 6 per cent, while its 20-year TSR slipped slightly from 9 per cent last year to 7 per cent this year.
With the 20 years a rolling period, the decline was attributed mainly to the exclusion of the economic recovery period of 2004 after the severe acute respiratory syndrome outbreak.
Speaking at a press conference on Tuesday, Chia Song Hwee, the deputy chief executive officer of Temasek, said that the entity’s portfolio returns over 10 and 20-year periods are its main focus.
“For the type of capital that we have, it is well-suited for us to take a long-term view and invest with that in mind. We’re not a kind of a day trader investor,” he said.
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The longer-term 10-year and 20-year TSRs are also “more indicative” of its performance and are aligned with its mandate to generate sustainable returns over the long term.
Meanwhile, Temasek’s net portfolio value (NPV) stood at S$389 billion, up S$7 billion from a year ago.
After marking its unlisted portfolio to market, the NPV rose to S$420 billion, up S$9 billion from last year.
Excluding Singapore, the US continued to be the leading destination for Temasek’s capital, followed by India and Europe. It has also stepped up investments in Japan.
Total shareholder returns
The improvement of Temasek’s one-year TSR into positive territory comes after the entity posted a one-year TSR of negative 5.07 per cent the previous year, its worst performance in seven years.
Explaining the yearly TSR figures, Connie Chan, the head of financial services at Temasek, told The Business Times (BT) that Temasek is “not immune” to year-to-year market volatility given that its investments are primarily in equities.
Added Chia: “What is important is the underlying assets and whether their performance can continue into the future.”
Temasek’s returns, and those from sovereign wealth fund GIC and the Monetary Authority of Singapore, account for the second-biggest source of funding for Singapore’s Budget.
MTM reporting of unlisted assets
Temasek said it was refining its MTM (mark to market) methodology to make the reporting of its unlisted portfolio – which has grown from 20 per cent to more than 50 per cent over the past two decades – “more in line with its peers”.
These peers include Singapore’s sovereign wealth fund GIC, Canadian funds such as Ontario Teachers’ Pension Plan and private equity investment firm KKR.
“Given that our unlisted assets now form a majority of our portfolio, we’re often asked about what is the MTM value of our unlisted portfolio. So this would also facilitate comparison with our peers who also mostly report on a MTM basis,” said Chan.
With the refined methodology, Temasek’s unlisted portfolio will see a S$31 billion value uplift, bringing its overall NPV to S$420 billion.
Temasek also presented the MTM NPV for FY22 and FY23 on a similar basis for consistency.
When applied to FY2023, the MTM uplift for unlisted assets is S$29 billion, bringing the MTM NPV to S$411 billion.
Similarly, when applied to FY2022, the MTM uplift of unlisted assets is S$35 billion, bringing the overall NPV to S$438 billion.
Temasek’s unlisted assets also generated returns of 9 per cent per annum over the last decade, outperforming the 6 per cent return of its overall portfolio over the same period.
Portfolio affected by China’s underperformance
Temasek’s returns have been impacted by China’s market performance in recent years, with the MSCI China declining by 46 per cent in the last three years.
Between 2004 and 2014, MSCI China’s returns were comparable to Temasek’s 10-year TSR at 9 per cent as Temasek benefited from its investments in China banks and the growing Internet economy.
However, its returns in the following decade from 2014 to 2024 have fallen to 2 per cent, whereas Temasek’s 10-year TSR has come in at 6 per cent, due to China’s slower pace of recovery post-Covid.
Overall, Temasek’s 20-year TSR of 7 per cent “outperformed” the MSCI China’s 5 per cent over the last two decades, said Chan.
Alpin Mehta, the head of real estate at Temasek, said that although China is maintaining a “pro-growth” policy stance, structural challenges remain.
Global multinational companies have accelerated the diversification of their supply chains, which could lower China’s productivity gains.
Without a commensurate pickup in domestic demand, growth and inflation will continue to face downward pressure.
Geopolitical tensions and threats of additional tariffs could also impact export demand for Chinese goods, said Mehta.
Chia said that although Temasek has “doubled down” on its investments in developed markets such as the US and Europe, it will take time for its portfolio to generate a return to offset the pressures that Temasek is facing from the China market.
