The equity shareholdings of Temasek Holdings Pte (Temasek) and its subsidiaries have plummeted close to S$34.24b since January due to the spread of the Covid-19 pandemic.
Temasek controls or owns multibillion-dollar stakes in global companies, from Singapore Airlines Ltd. to e-commerce titan Alibaba Group Holding Ltd. Based on a Bloomberg analysis, there is a fall in market value of the top 12 holdings of Temasek and its subsidiary firms by about one-third.
The steep decline occurred at critical time for the country, as its financial footing is somewhat tied to Temasek, the Monetary Authority of Singapore and the sovereign wealth fund GIC Pte.
The formula adopted by the state is used to calculate the net investment return contribution by including the expected long-term returns of all three agencies. Every year, the net investment return helps fund the budget. The contribution is predicted to be S$18.6 billion in fiscal 2020.
Earlier in March, the President Halimah Yacob noted that the country’s people and businesses that are “bleeding” from Covid-19’s impact need assistance which can come from the country tapping into past reserves.
Temasek Holdings Chairman Lim Boon Heng said last Tuesday (17 March) at a community event that the most important priority was to withstand the crisis, as he replied to a query about the likely drop in Temasek’s portfolio value due to Covid-19.
Temasek’s spokesman commented no further than this: “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.”
On 2 January, Temasek’s combined top 12 equity holdings by market value of S$107.28 billion had dropped to S$73.12 on 20 March. Shares where the company is considered to have beneficial interest is also included, such as Advanced Info Service Pcl, the Thai mobile phone operator, that is also partly-owned by Singapore Telecommunications Ltd., a Temasek subsidiary.
On Monday (23 March), the country’s benchmark Straits Times Index (STI) plunged 7.4 per cent.
The largest source of the drop is Singtel, as it saw Temasek’s majority stake in the company plummeting S$10.76 billion. The next biggest loser is DBS Group Holdings Ltd., as it slumped S$7.70 billion, followed by Singapore Airlines, which saw Temasek’s interest falling S$2.47 billion as capacity was cut 96% on Monday.
Amidst the ailing equity market and the impacted oil prices, Temasek is not the only one affected.
Although state funds are arguably better-abled to endure volatility due to them adopting a long-term perspective, there can be substantial impact when their reserves are needed.
Not All Doom
To finance its historic stimulus package to combat the damage from Covid-19, Norway, for instance, will withdraw an unprecedented USD$13 billion (S$18.90 billion) funds from its large sovereign wealth fund. According to the data by the Sovereign Wealth Fund Institute, state funds oversee some of the largest pools of investments worldwide, with the 10 biggest controlling USD$5.8 trillion (S$8.43 trillion).
This quarter’s drop in share values marks a disappointing conclusion to what was expected to be a reasonable year for Temasek, even in the midst of US-China trade conflict.
Temasek International Chief Executive Officer, Dilhan Pillay stated in January that there was around 3 per cent increase in the company’s portfolio value.
As of 31 March last year, Temasek owned a net portfolio value of S$313 billion, which was 1.6 per cent more than in 2018.
Despite this, Temasek is not doomed just because public equities dropped. As of 31 March last year, around 42 per cent of its assets were not listed publicly and so they are less impacted by stock market volatility.
In a few months, the annual report for the year ending 31 March 2020 will be published by Temasek. In February, a company-wide voluntary pay cuts and wage freeze for senior management was announced as a partial means of funding community programs to cushion the damage from Covid-19.