A recovering global economy and strong stock markets helped lift Temasek Holdings' net portfolio value to a new all-time high, it reported yesterday.
But the Singapore investment company warned in its annual review that the global economic recovery is still in its early stages and uncertainties remain in the medium and long term. It also faces stiffer competition in a difficult investing environment as yield-hungry investors drive up asset prices and make it tougher to find good deals.
Temasek posted 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 strong performance in equity markets around the world over the period from April 1 last year to March 31 this year, Temasek said yesterday.
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 as business sentiment recovers in both emerging and developed markets, helping to lift corporate earnings, Temasek head of strategy Michael Buchanan said. But the pickup 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 last year.
This came as it 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. He said: "Given valuation considerations as well as rising competition for transactions, we have reduced our pace of investment a fair bit."
Key divestments in the year included positions in Synchrony Financial, Bharti Airtel, LafargeHolcim and Evonik Industries. Temasek also exited some holdings through third-party acquisitions, including divestments of its stakes in Neptune Orient Lines and B/E Aerospace.
The US accounted for the largest share of Temasek's investments in the year. Singapore made up the bulk of its portfolio at 29 per cent.
Executive director and chief executive Lee Theng Kiat said Temasek continues to focus on long-term opportunities in sectors like technology, life sciences, agribusiness, non- bank financial services, consumer, as well as energy and resources.
Temasek reiterated that it delisted SMRT Corp last November to give the operator room to focus on improving rail services without the pressure of short-term market expectations. Mr Chia said SMRT was "privatised just a few months back - there is still a long way to go through the transition and work on service and reliability challenges".
CIMB Private Bank economist Song Seng Wun said Temasek's performance in the past year was in line with robust equity markets.
"People are waiting to see when the correction comes. Investors, including Temasek, are holding on to a lot of cash relative to historical levels because of wariness over where the markets are going," he said. "When valuations are up, it is prudent to take some money off the table so that you have ammunition on standby when the correction comes."