Temasek Portfolio Value Shrinks for First Time Since Global Debt Crisis

SINGAPORE—Singapore's state investment firm Temasek Holdings Pte. Ltd. said on Thursday the value of its portfolio dropped for the first time since the global financial crisis largely due to falls in the share prices of its holdings in financial and resources companies.

Temasek, the world's twelfth-largest institution of its kind according to the U.S.-based Sovereign Wealth Fund Institute, said its total assets dropped to 242 billion Singapore dollars (US$180 billion) in the year ended March 31, from S$266 billion a year earlier, the first such decline in seven years. Its net profit also fell by 43% to S$8 billion.

The fund, which holds large stakes in banks such as Standard Chartered PLC and China Construction Bank Corp., as well as major local companies like Singapore Airlines Ltd., warned the current financial year, which ends in March 2017, could prove challenging too.

"Equity markets around the world will remain susceptible to bouts of volatility in the short to medium term," said Michael Buchanan, Temasek's head of strategy. He said the increased uncertainty reflected an "ongoing hangover" from the financial crisis eight years ago and lower returns should be expected in the coming years.

Temasek's poor results show how big sovereign-wealth funds, which rank among the world's largest investors, are struggling to generate strong returns with interest rates near zero—and sometimes in negative territory -- in major developed countries, and growth moderating in key emerging markets like China. Around 70% of Temasek's funds are invested in Asia, with the rest spread roughly evenly between North America, Europe, and Australia and New Zealand.

Norway's near-$900 billion sovereign-wealth fund, the largest of its kind globally, last year recorded its weakest performance since 2011, which it blamed partly on slowing growth in emerging markets.

Banks, which have been struggling with narrowing interest margins, were among the hardest-hit of Temasek's investments. The value of its 16% stake in Standard Chartered, a bank heavily exposed to emerging markets and commodity companies, plunged 43%, while the worth of its holding in Singapore bank DBS Group Holdings Ltd. fell 24%.

The firm also suffered a decline in value on some its holdings in commodities companies, particularly those in the oil industry. Its 49% stake in Singapore-based Sembcorp Industries Ltd., one of the world's largest rig builders, dropped by 28% in value.

In an attempt to improve returns and find companies with better growth prospects, Temasek has been shifting little-by-little into the technology sector, and says it is looking at making investments in newer industries such as artificial intelligence and life sciences.

At the end of March, 25% of its portfolio was in telecommunications, media and technology companies, up from 24% a year earlier, while its weighting toward financial services fell to 23% from 28%.

Among major new investments in 2015, Temasek took an undisclosed stake in Beijing-based ride-hailing app Didi Chuxing Technology Co. and Airbnb Inc., a U.S.-based home-sharing website. Big divestments included the sale of its stakes in U.K. bank Lloyds Banking Group and Singapore semiconductor firm STATS ChipPAC Ltd.

Write to P.R. Venkat at venkat.pr@wsj.com and Jake Maxwell Watts at jake.watts@wsj.com

(END) Dow Jones Newswires

July 07, 2016 05:25 ET (09:25 GMT)

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