20150927 Temasek’s portfolio likely to experience wipeout in next financial crisis

Two months ago, Temasek reported a one year shareholder return of 19.2% for FY 2015. Its portfolio value (PV) increased by $43 billion to $266 billion and as usual, Temasek reported an unbelievable 16% compounded return since 1974.

On closer scrutiny, most of the $43 billion increase came from its 10 largest listed investments valued at about $112 billion on 31 March 2015 (table below). With the recent market correction, the market value of these 10 investments have fallen by $22 billion or about 20%.

. Name S$ (bil) 31-Mar 25-Sep Decrease % S$ (bil) Dec
1 Singtel 36 S4.38 3.64 0.74 17 6.1
2 DBS 14.6 $20.36 16.77 3.59 18 2.6
3 CCB 14.5 HK6.44 5.24 1.2 18 2.6
4 Standard 9.7 1093p 660 433 40 3.9
5 SIA 7.8 $11.95 10.61 1.34 11 0.9
6 ICBC 7.6 HK5.72 4.52 1.2 21 1.6
7 Capitaland 6 $3.58 2.79 0.79 22 1.3
8 Alibaba 5.7 US$83.24 60 23.2 29 1.7
9 S Tech Eng 5.5 $3.48 2.88 0.6 16 0.9
10 Level 3 Com 4.7 US$53.84 44 9.84 18 0.9
. Total 112.1 . . . . 22.5

Extrapolating from the above figures, Temasek could have already lost the entire $43 billion gained in FY 2015. What’s worrying is some of its investments in China’s financial institutions.

One example would be China Construction Bank (CCB) whose value was $14.5 billion in October last year. In 7 months, its market value shot up by $7.1 billion, only to fall by $8 billion during the next 4 months.

Source: Yahoo

The stock market bubble was caused by speculation fueled by a series of interest rate cuts, the Chinese media and government. Weeks before the spectacular stock market collapse, up to 4 million new trading accounts were opened weekly. On April 21, the Chinese government provided a rocket booster with the state-run People’s Daily declaring the Shanghai Composite Index’s surge past 4000 on April 10 was “just the beginning of the bull market”.

Why does Temasek prefer to invest in China instead of developed countries despite much higher risks?

And it’s not just CCB but almost all investments have experienced a collapse in value.

Last year, DPM Tharman had given the assurance that the three Singapore investment entities would not take on more investment risk even if their returns are low. ???

Temasek doesn’t seem to have learnt any lesson from its billion-dollar losses in Merrill Lynch and Barclays during the last financial crisis. It has merely relocated it speculative activity from UK and US to China. Worse, investments in China have increased to 27% of its portfolio. With profits falling and bad debts rising, Temasek’s investments, particularly in China, may be underwater for a long time.

Global stock market recovery has been based on central banks injecting trillion$ in liquidity and has little to do with improving fundamentals. Stock markets seem to have signaled a sharp correction ahead and the likelihood of Temasek’s portfolio being wiped out is increasing by the day.

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11 Responses to 20150927 Temasek’s portfolio likely to experience wipeout in next financial crisis

  1. Xmen says:

    In addition, a large chunk of the investments in China is probably frozen by decree…

  2. phillip ang says:

    Temasek just increased ICBC to 10% by buying 30 million shares worth S$25 million in a “show of confidence”.
    You’re right, the Chinese government will allow TH’s profit only on paper cause it needs TH as a confidence booster to suck in more foreign money. TH is now in the same boat laden with increasing corporate debt which its SOEs need to reduce very badly.

  3. Anthony Sim says:

    If this wipeout come into full swing, TH will be burdened with one of the highest loss which will escalate by pulling the Sing Fin Market into a downward spiral. The only ones to suffer are the “poor” Singaporeans with their very financial savings locked in CPF….and when CPF is bleeding money due to poor investments, the ones badly HIT are the members of CPF.

    • phillip ang says:

      Singaporeans still refuse or simply can’t see the connection – losses incurred by Temasek and GIC ultimately affect social spending, the withdrawal and returns on our CPF.

  4. Akers says:

    “Problems cannot be solved with the same mind set that created them.”
    “The definition of insanity is doing the same thing over and over again, but expecting different results”
    ― Albert Einstein

    That’s why great companies would fire their CEOs who made mistakes and get in a qualified team.

  5. phillip ang says:

    So long as transparency doesn’t see daylight, PAP will remain a great company. 😦 No need to fire CEOs, just recycle them. Insufficient positions? No problem, just create new ones.
    PAP is not merely a great company but the greatest!

  6. Sue Leong says:

    Temasek should be doing well to invest in China than USA, UK or Europe where financial markets will be collapsing soon due to their great debts and near zero interest rates. China, Singapore, India and Philippines are safe markets…park your money in the East.

    • phillip ang says:

      China’s stock market is a huge casino. Look at the bank shares which Temasek has invested about $30 billion plus – they have been going nowhere for the past 5 years. If investments are doing well, Temasek would have already disclosed its winners.
      China’s stock market is prone to government meddling, creating a boom and bust all within one year. Good investment climate??

  7. Sue Leong says:

    In time to come, to come out of the economic crisis, all players shall have to prove their strength by the gold reserves they hold…USA is bankrupt in gold and US$ is no longer pegged to gold…Chinese and Islamic banks are safer….even Germany is in deep trouble with the Volkswagen scandal and refugee issues…and its Deutsche bank is rumoured to be going through deep water..and could go the way of Greece…markets in so-called developed countries are no longer secured…not even Japan!

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