GIC sees buy opportunities, long-term returns despite inflation risks, China downturn

SINGAPORE – Despite concerns about inflation, geopolitical tensions and slower growth, GIC chief executive Lim Chow Kiat sees opportunities for the Singapore investment fund to invest at attractive valuations in exchange for better yields in the long term.

Treasuries and bonds are now yielding more after several rounds of interest rate hikes by the Federal Reserve in efforts to cool inflation, and “that is a positive thing for investors”, Mr Lim said on a panel discussing global capital flows and availability at the Bloomberg New Economy Forum on Wednesday.

Markets have not seen the current yield on 10-year Treasury inflation-protected securities of around 2.5 per cent for “a long time”.

“That’s very attractive. Higher asset yields should be good for longer term returns,” he said. 

There are also opportunities to invest in projects related to energy transition.

Mr Lim noted that there is a gap between the amount of capital needed for countries and companies to make the transition from fossil fuels to renewable energy, and the amount currently deployed.

“We need US$4.3 trillion (S$5.8 trillion) a year to fund the energy transition. Last year, only US$1.8 trillion was deployed. That’s a big gap but also an opportunity for investors as more projects and companies will need capital for the energy transition.”

Mr Lim said GIC is a big investor in infrastructure, including for renewable energy, injecting around US$20 billion a year in the sector.

“In the renewable energy space, cost curves have been coming down to commercially viable levels and this will drive private capital into the sector. If governments make more projects available, private-sector capital is ready to be deployed into this area.”

Despite some US$160 billion in capital outflows from China over the last six consecutive quarters, GIC is also exploring opportunities to invest in China.

“When assessing (whether to invest in) a country, we look at the availability of talent, capital and size of the market.

China has all this in place, the US has all this in place,” Mr Lim said.

He added that China’s economy is going through a period of adjustment that has led to slower economic growth. However, the country is nevertheless advancing in sectors like the green economy and sustainability, and GIC has moved capital into these areas of growth, while staying cautious on more industrial sectors.

“As a global investor, we cannot afford not to look at China and deploy capital there,” Mr Lim said.

GIC is one of the three investment entities in Singapore that manage Singapore’s reserves, alongside the Monetary Authority of Singapore and Temasek.

GIC maintains a diversified portfolio spanning six core asset classes, each with a different risk and return profile. These include developed and emerging market equities, nominal bonds and cash, inflation-linked bonds, real estate and private equity.