Singapore's sovereign wealth fund, Temasek Holdings, increased its exposure to China by S$10 billion (approximately US$7.7 billion) in the last fiscal year ending March 31, marking the largest annual net addition since 2021.
Over the past decade, the fund's cumulative net new investments in China total around S$24 billion.
The state investor is shifting the focus of its China portfolio towards hard technology sectors, including AI hardware, computing infrastructure, robotics, biopharmaceuticals, and the energy transition.
Key Developments
During a press briefing for the annual results on Wednesday, Temasek's Chief Executive Officer Dilhan Pillay Sandrasegara noted signs of a market recovery in China.
Temasek reported that its five-year total shareholder return was 4.6% for the fiscal year, impacted by multiple downward pressures in the Chinese capital markets from 2021 to 2024. The recent market valuation recovery has also contributed to the expansion of its China holdings.
In terms of portfolio allocation, China's share has decreased from 29% in 2020 to 17%. Despite this reduction, China remains Temasek's third-largest investment destination, following Singapore (27%) and the Americas (26%, up from 24% the previous year).
Strategic Portfolio Shift
The fund is gradually reducing its earlier heavy allocations to consumer and real estate sectors, redirecting capital towards what it defines as "hard tech" areas.
Rohit Sipahimalani, Temasek's Chief Investment Officer, stated that China's economy has moved beyond a phase of high-speed growth into a more mature stage of development, necessitating a more selective and tailored investment approach.
Within the consumer sector, Temasek shows greater optimism for experiential consumption and innovative domestic brands over foreign ones. However, the fund also observed that the domestic consumption recovery remains uneven and broad-based stimulus measures in the near term are unlikely.
New Investment Highlights
Notable new investments during the fiscal year included China's Luckin Coffee and logistics firm J&T Express, alongside global names such as Anthropic and OpenAI in the US, and Italy's Ermenegildo Zegna Group.
Temasek initially held an indirect stake in Luckin Coffee through private equity firm BOC Capital. Regulatory filings in May this year revealed that Temasek now holds a direct 6.4% stake in the company.
When questioned about the investment, Sipahimalani clarified that Temasek proceeded only after Luckin had fully resolved its legal and corporate governance issues. He emphasized that the company's current priority is building a stable, sustainable business, addressing rumors of a potential relisting.
In February, a consortium including Temasek, BOC Capital, and its private equity arm True Light Capital completed the privatization acquisition of J&T Express.
Portfolio Performance
As of March 31, Temasek's net portfolio value reached a record high of S$518 billion (approximately US$401 billion), achieving growth for the third consecutive year.
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