Temasek underlines scale of diversification task

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By:
Chris Leahy
Published on:

Announcing its second annual report, Temasek Holdings, a Singapore-based private-equity group owned by the Singapore government, announced total shareholder returns in 2004 of 16% on its investment portfolio, down from the 46% returns earned during the previous year.

To some extent, Temasek is a victim of its own success. A rapid and ambitious restructuring of its portfolio by incoming managing director Ho Ching in 2002 yielded early benefits. Since then Temasek has been very much in capital deployment mode. Returns from many of these investments will take time.

To illustrate the extent of Temasek’s investment spree, the firm announced that it had made total investments of S$13 billion (US$7.7 billion) in the year to March 2005. That compares with total investments of S$3.3 billion for the previous two years combined. Moreover, the 2005 total does not include the firm’s US$5 billion of commitments to China Construction Bank and Bank of China.

Exposure

Temasek has a stated intention of reducing the exposure of its portfolio on Singapore businesses to 33% by investing elsewhere in Asia. While progress towards that goal has been made – Singapore assets comprised 49% of the portfolio as at March 2005 compared with 52% in 2004 – there is still a very long way to go. Even accounting for the additional $5 billion Chinese bank investments, Singapore assets still probably account for more than 45% of the portfolio. There seems little likelihood that Temasek will slow its pace of investment any time soon.