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Singapore’s state investor Temasek has become more bearish on European companies over their exposure to a global trade downturn, just a year after opening a Paris office to great fanfare and promising to commit $19bn to the region.
Rising trade tensions from US President Donald Trump’s tariffs have made Temasek fearful that the European companies it has previously targeted for investment will be among the worst affected.
“There is a sense of elevated trade uncertainty, which could impact the growth trajectory” of Europe, said Lim Ming Pey, joint head of corporate strategy at Temasek. “Tighter credit conditions for the domestic market may also form headwinds, but the moderated inflationary pressures can enable the European Central Bank to keep rates low.”
Temasek is one of the world’s largest institutional investors and has traditionally favoured European companies with a global presence, believing their domestic markets do not have enough growth.
Among its holdings are a 17 per cent stake in UK-headquartered bank Standard Chartered and a 5 per cent position in Dutch payments group Adyen.
Temasek on Wednesday reported a net portfolio value of S$434bn (US$339bn), up more than 11 per cent from the previous year. It said the growth was driven in part by direct investments in China — where it has stakes in Tencent, Alibaba and insurer Ping An — as well as by holdings in the US and India.
About 12 per cent of its portfolio is invested in Europe, the Middle East and Africa, down a percentage point from a year ago. Its exposure to Singapore was steady at 27 per cent, while China declined a percentage point to 18 per cent.
Last year, Temasek opened an office in Paris with a ceremony attended by Lawrence Wong, who has since become Singapore’s prime minister, and Bruno Le Maire, then France’s finance minister.
Temasek said at the time that it planned to invest up to S$25bn in Europe over five years. Chief investment officer Rohit Sipahimalani said these plans were still on track.
While the investment team has adopted a more bearish outlook on Europe, it has begun encouraging its main portfolio companies — among the largest listed companies in Singapore, including several national champions — to make deals in the Middle East.
Temasek wants to increase its exposure to the region but believes there is already plenty of capital in the Gulf given the number of large local sovereign wealth funds, according to people involved in the investor’s decision making.
It feels the best way to access the market is through coaxing Singaporean companies to buy Middle Eastern businesses or to strike partnerships and joint ventures with them, said the people.
Among Temasek’s biggest Singaporean holdings are a 28 per cent stake in DBS, the city-state’s biggest bank, a 53 per cent stake in national carrier Singapore Airlines and outright ownership of energy company SP Group.
Temasek said its annualised return was 5 per cent over a 10-year period and 7 per cent over 20 years. It marked the value of its unlisted assets up by S$35bn, and they now comprise 49 per cent of its holdings, down from 52 per cent last year.
It said it had been taking advantage of investor demand to exit private investments by buying up stakes.
“When we recognise that other asset owners or funds may have a need for liquidity and the high-quality assets that we are interested in, we actually try to be proactive and approach them,” said Sipahimalani.
Temasek was set up in 1974 to manage the Singaporean government’s stakes in large domestic companies after they were privatised.
In recent decades, it has increased its investment overseas, with particular interest in its portfolio companies getting involved in large infrastructure and real estate projects.
Representatives from several portfolio companies were part of a trade delegation to the Middle East last year, and two Temasek subsidiaries, Mapletree Investments and Seviora, have recently opened offices in Abu Dhabi.
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