Published August 27, 2008

Bet on Asia stays, but Temasek sheds some assets

Its investments in US and UK banks were 'primarily because we saw value', says MD

By CONRAD TAN

	Email this article
	Print article
	Feedback

(SINGAPORE) Temasek Holdings' focus on Asia has reaped substantial rewards so far, even as it poured billions of dollars into US and UK banks over the past year.

Portfolio shift: The large divestments in Asia saw, for the first time, Temasek's net investments outside Asia exceeding net investments in Asia

Investments made since 2002, when Temasek reshaped its portfolio to boost its exposure to emerging Asia, earned an annualised return of 32 per cent over the six years to end-March - double the 16 per cent returns on the rest of its portfolio, said Michael Dee, Temasek senior managing director, international, at a media briefing yesterday.

Investments made since March 2002 now make up 41 per cent of Temasek's $185 billion portfolio, he added.

Over the year to end-March, Temasek invested just under $17 billion in Asia and another $15 billion outside the region.

But it also divested more Asian assets than non- Asian assets during the year - $12 billion compared with $5 billion.

Within Asia, Temasek trimmed its portfolio exposure to North Asia to 22 per cent from 24 per cent, selling its stake in China Cosco Holdings. Temasek also pared its stakes in other major Chinese firms such as China Construction Bank and Bank of China.

But Temasek also boosted its exposure to South Asia, buying a stake of 4.99 per cent in Indian mobile operator Bharti Airtel for an estimated US$2 billion last year.

And in March this year, it sold Singapore power generating company Tuas Power for $4.2 billion. That prompted a fall in Temasek's portfolio's exposure to Singapore to 33 per cent as at end-March, from 38 per cent a year earlier.

The large divestments in Asia meant that for the first time, Temasek's net investments outside Asia exceeded net investments in Asia, with 68 per cent or $10 billion outside Asia and the remaining 32 per cent or $5 billion in Asia.

Its major forays outside Asia included a US$4.9 billion investment into Merrill Lynch in the US and £pounds;975 million (S$2.6 billion) in Barclays in the UK, both last year. It also raised its stake in UK-based Standard Chartered Bank to 19 per cent from 13 per cent.

This contrasts starkly with the previous five years, during which Temasek's total net investment outside Asia was just $1 billion, while net investment in Asia was $26 billion.

But Temasek chairman S Dhanabalan said in the 2008 Temasek Review published yesterday that the firm continues to like Asia, even as it adds to its investments elsewhere.

'We will continue to broadly focus on Asia with its long-term trend of growth and development in the next decade or two.'

Temasek is also looking to increase its exposure further afield, including new markets such as Russia and Latin America, said Mr Dhanabalan. 'We are setting up offices in Mexico and Brazil to deepen and broaden our exposure to Latin America.'

The firm has boosted its staff strength to 350 over the past year, from 250 previously, and set up a new international division that will oversee all of Temasek's overseas offices, said Mr Dee. 'We're expanding our global footprint.'

Its recent investments in US and UK banks were 'primarily because we saw value', said Manish Kejriwal, Temasek senior managing director of investment, international and India.

Asked if Temasek was concerned over the recent declines in the share prices of banks it had stakes in, Lao Tzu Ming, managing director of risk management, said: 'Unlike short-term traders such as hedge funds, we are not highly geared - therefore we can ride through the storms.'

The portfolio remains well-diversified, said Temasek. Its single largest investment accounts for less than 19 per cent of its overall portfolio, down from 26 per cent five years earlier.