SINGAPORE - A recovering global economy and strong stock markets helped lift Temasek Holdings' net portfolio value to a new all-time high, it reported on Tuesday (Jul 11).
But the Singapore investment company warned in its annual review that the global economic recovery is still in its early stages and a host of uncertainties remain, both in the medium and long term.
It is also facing stiffer competition amid a difficult investing environment - yield-hungry investors are driving up asset prices and making it tougher to find good deals.
Temasek reported a record net portfolio value of $275 billion as at March 31, up from $242 billion a year earlier.
Its one-year total shareholder return was 13 per cent, reflecting the strong performance in equity markets around the world over the period from April 1, 2016, to March 31, 2017, Temasek said on Tuesday (Jul 11).
This measure includes dividends paid to its shareholder, the Finance Ministry, but not capital injections from the ministry. Temasek's shareholder did not make any capital injections in the last financial year.
The strong showing comes amid recovering business sentiment in both emerging and developed markets, which has helped lift corporate earnings, said Temasek's head of strategy, Mr Michael Buchanan.
But the pick-up has been gradual and geopolitical risks remain, including the rising tide of protectionism around the world.
Temasek's latest set of numbers also showed that its divestments exceeded its investments for the first time since the year ended March 2009. It invested $16 billion and divested $18 billion of its portfolio last year.
This came as the firm took advantage of high valuations to sell off some assets while holding back on new purchases due to these elevated prices, said Mr Chia Song Hwee, the joint head of Temasek's investment group.
"Given valuation considerations as well as rising competition for transactions, we've reduced our pace of investment a fair bit," he added.
Key divestments during the year included positions in Synchrony Financial, Bharti Airtel, LafargeHolcim and Evonik Industries.
Temasek also exited some holdings through third-party acquisitions - including the divestments of its stakes in Neptune Orient Lines and B/E Aerospace.
The United States accounted for the largest share of Temasek's investments during the year. Major deals include a US$800 million investment in Verily Life Sciences, a life sciences research and engineering outfit spun off from Google.
Singapore continued to make up the bulk of Temasek's portfolio at 29 per cent.
Temasek has been shifting towards emerging tech-related opportunities in key sectors such as financial services, which made up a quarter of its portfolio as at Mar 31.
Executive director and chief executive Lee Theng Kiat said Temasek continues to focus on long-term opportunities in sectors such as technology, life sciences, agribusiness, non-bank financial services, consumer, as well as energy and resources.
Temasek's investments in these new focus areas have risen from 8 per cent of its portfolio to 24 per cent last year and delivered strong returns, added Mr Lee.
Temasek also reiterated its rationale for delisting transport operator SMRT Corp last November.
"With the change in regime we believe it is better for SMRT to operate as a private company focusing on improving service quality and rail reliability and not be distracted by...the requirements of being a publicly-listed company," said Mr Chia.
"They were privatised just a few months back - there's still a long way for them to go through the transition and work on service and reliability challenges."