Erosion of assets gets innovation-related businesses under focus

Temasek Holdings Pte is remodeling its investment portfolio in China by looking for more opportunities in innovation-related businesses.

"We're highly interested in business model innovation, technology innovation and transformation of traditional industries," said Wu Hai, Temasek's managing director for China, during a press briefing of its annual results on Friday.

"We are looking into new economic forms driven by the mobile internet, such as the sharing economy, big data-based sectors including cloud computing, robots and artificial intelligence, as well as electric automobiles and mobile healthcare," said Wu.

The company, which is the Singaporean sovereign wealth fund investment arm, posted the first decline in its net portfolio value since 2009.

It recorded a net portfolio value of S$242 billion ($180 billion) as of March 31 - a 9 percent fall from the previous year, largely due to the fall in market values of its holdings.

"This is not an actual loss, but a mark-to-market decline in asset values caused solely by a drop of market price," said Wu Yibing, joint head of portfolio strategy and risk group at Temasek.

"Asian stock markets fluctuated violently last year. Hang Seng China Enterprises Index slumped 26 percent, and the Straits Times Index dropped 15 percent. Among the assets of our investment portfolio, 66 percent of the listed companies we invested in are constituent stocks of the two indexes."

Temasek's largest geographic concentration by underlying assets remains in Asia (69 percent), with 29 percent in Singapore and 25 percent in China by the end of March.

Wu Yibing said Temasek expects that China will successfully complete a mid-term transition to more sustainable growth, but short-term uncertainties still remain.

"As a long-term investor, we care a lot more about the long-run fundamentals of a company than short-term market fluctuations.

"In the meantime, we'll look for opportunities during the fluctuations by divesting more actively when the prices are high and investing more actively when the prices are low," he said.

During the fiscal year ending March 31, the company divested a record S$28 billion of its portfolio, including part of its holdings in China Construction Bank Corp and China Pacific Insurance Group Co Ltd. Total divestments increased 47 percent from a year earlier. Its S$30 billion of new investments remained the same as the previous fiscal year.

In line with the theme of investing in companies with distinct competitive advantages, Temasek increased its investment in Didi Chuxing, a leading Chinese ride-hailing company, and Meituan-Dianping, an online-to-offline local service platform in China.

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