Published June 1, 2009

Temasek recoups half of losses in S'pore portfolio

Market rally boosts investments in 12 S'pore firms by $16.4 billion over 6 months

By LYNETTE KHOO

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(SINGAPORE) The recent market rally has helped Temasek Holdings recoup close to half the paper losses it incurred in Singapore equities last year.

And if the market continues on its current uptrend, the numbers should improve further.

Based on estimates by The Business Times, Temasek's investment in 12 Singapore equities put on $16.4 billion over six months between end-November last year and May this year.

It had earlier incurred an estimated $32.9 billion of paper losses in these 12 companies from March 31 to Nov 30, 2008.

For the fiscal year ended Mar 31, 2009, however, Temasek's portfolio of 12 Singapore stocks could have seen value erosion of 37.7 per cent to about $49.89 billion. These paper losses are expected to show up in Temasek's FY2009 annual report due out soon.

But 'green shoots' are now appearing on its report card. In just the last two months, the value of Temasek-linked companies listed on the Singapore Exchange increased by 27.3 per cent or $13.6 billion to $63.5 billion.

Year-to-date, the combined value of its local investments in listed companies is 27.2 per cent or $13.57 billion higher than end-2008.

Fund managers and analysts note that there is high chance of recouping the other half of the $32 billion of paper losses given the current bullish view on Singapore stocks.

Wong Sui Jau, general manager of Fundsupermart, says he is positive on local equities, which are trading at reasonable valuations, and expects blue chips to rise further as earnings improve.

CIMB-GK research head Kenneth Ng said: 'I think it (Temasek) will recoup a good part of the loss reported in 2008 given that we are quite positive on this market rally.'

'The public is overly obsessed with the dollar value they lost,' he noted, adding that Temasek's performance is better assessed over cycles - a point which Finance Minister Tharman Shanmugaratnam also raised in Parliament last week.

Since March 2003, Temasek's portfolio had grown by a net value of $56 billion in spite of the losses posted in the last fiscal year ended March 31, 2009.

Over the six-year cycle, Temasek achieved an annualised return of slightly over 15 per cent in US dollar terms, compared with a 6 per cent annual return for global equity market indices based on the MSCI World Index.

But within a shorter period between end-March to November 2008, Temasek incurred $32 billion of paper losses in the 10 largest Singapore-listed stocks it holds.

Mr Tharman released these figures in Parliament last Thursday, and stressed that more than half of the $58 billion loss in Temasek's portfolio in the eight months between March 31 and Nov 30, 2008 was due to the market slump.

Based on the market caps of the 12 Temasek-linked companies, Chartered Semiconductor and STATS ChipPAC, were excluded from the top 10 companies.

Temasek's investment in these 10 companies have since regained $14.8 billion in value from end-November last year to May this year.

Quizzed by Members of Parliament over Temasek's recent loss-making divestment of Bank of America shares, Mr Tharman also cautioned against looking at each investment in isolation. The discipline should be that of looking at an overall portfolio, studying its returns over relevant periods of time, rather than short periods of time, he said.

Steven Lim, director of Archer Capital Investment, felt that a 15 per cent annualised return is 'a fair return given that (Temasek) is a big fund.' For smaller funds, it's easier to obtain a higher rate of return.

But some fund managers are circumspect about drawing conclusive assessments on the investment agency's performance. Incidentally, March 2003, which is used as a base comparison, coincided with a low in global equities.

'It is hard to say whether they have outperformed or underperformed ... as we do not know how that would compare with other benchmarks or against other funds with similar asset allocation,' Mr Wong said.

He also noted that a comparison across different sovereign wealth funds (SWFs) may not give a fair comparison, as different SWFs have different mandates - some invest more heavily in equities, others in fixed income.

'Certainly, no equity fund manager can make money consistently throughout every cycle ... but any outperformance should be measured against funds with similar asset allocation,' Mr Wong said.