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Temasek Holdings Pte’s biggest equity shareholdings and those of its subsidiaries have plunged almost $24 billion since January as the spreading coronavirus sends markets into spasms.
Singapore’s state investor owns or controls multibillion-dollar stakes in companies that straddle the world, from Chinese e-commerce giant Alibaba Group Holding Ltd. to Singapore Airlines Ltd. A Bloomberg analysis of the top 12 holdings of Temasek and companies it controls as of March 20 shows a decline in market value of around one-third.
The plunge comes at a critical time for Singapore, whose financial strength is partly linked to Temasek, sovereign wealth fund GIC Pte, and the Monetary Authority of Singapore. The government uses a formula that includes the expected long-term returns of all three entities to calculate the net investment return contribution, which helps fund the budget each year. In fiscal 2020, that contribution is expected to be S$18.6 billion ($12.8 billion).
Singapore’s President Halimah Yacob said earlier this month that the city-state must consider tapping past reserves to help its people and businesses that are “bleeding” from the impact of the virus.
Asked about the likely decline in value of Temasek’s portfolio due to the Covid-19 outbreak, Temasek Holdings Chairman Lim Boon Heng, speaking on the sidelines of a community event last Tuesday, said that the most important priority was to weather the crisis.
“It’s pretty obvious with the way stock markets are behaving recently that we should expect the returns to be down,” he said. “But now is not the time to think about whether you’ve made a loss or not. Now is the time to see how we can all get rid of this virus.”
A spokesman for Temasek declined to comment further.
Temasek’s top 12 equity holdings by market value were worth a combined $73.8 billion on Jan. 2 but had fallen to $50.3 billion as of March 20. This includes shares in which the firm is deemed to have beneficial interest, such as Thai mobile phone operator Advanced Info Service Pcl, which is part-owned by Temasek subsidiary Singapore Telecommunications Ltd.
The nation’s benchmark Straits Times Index slumped 7.4% Monday.
Singtel is the biggest source of the decline, with Temasek’s majority stake in the business slumping $7.4 billion. Next is Southeast Asia’s biggest bank, DBS Group Holdings Ltd., down $5.3 billion. Temasek’s interest in Singapore Airlines, which on Monday slashed capacity by 96% amid the escalating outbreak, has declined $1.7 billion.
With equity markets swooning and oil prices taking a hit, Temasek is far from the only one suffering. While state funds are arguably better positioned than most to ride out bouts of volatility because they take a long-term view, when their reserves are required, there can be significant consequences.
Not All Doom
Norway, for example, looks set to withdraw a record $13 billion from its giant sovereign wealth fund to help pay for the historic stimulus measures being unveiled to combat the virus impact. Globally, state funds control some of the biggest pools of investments with the 10 largest overseeing $5.8 trillion, data from the Sovereign Wealth Fund Institute show.
The slide in share values this quarter is also a disappointing end to what was shaping up to be a reasonable year for Temasek, even despite the U.S.-China trade war. In January, Temasek International Chief Executive Officer Dilhan Pillay said the firm’s portfolio value was up by about 3%. It’s Pillay’s first year at the helm.
Temasek had a net portfolio value of S$313 billion as of March 31, 2019, up 1.6% from the year prior.
That’s not to say the decline in public equities spells outright doom for Temasek. About 42% of its assets as of March 31, 2019 were not publicly listed and are therefore less affected by volatile stock markets. Temasek is due to release its annual report for the year ended March 31, 2020 in a few months.
Temasek last month announced a company-wide wage freeze and voluntary pay cuts for senior management in part to help fund community programs aimed at alleviating the impact of Covid-19.
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