Temasek new CEO still positive on China despite large investments stuck in Jack Ma’s Ant Group

Temasek’s newly appointed CEO Dilhan Pillay Sandrasegara said Temasek is still committed to China, despite recent developments such as the cancellation of Ant Financial Group’s public listing. This was reported by Bloomberg on Tuesday (9 Feb).

“We’re still very positive on the long-term trajectory of China from what we can see,” Pillay said, when asked about China by reporters after he was named to replace Ho Ching, who will step down in October after 17 years as head of Temasek.

Presently, Temasek is a leading investor in China with deals ranging from startups and technology giants to banking institutions. Last September, it said that holdings in China had surpassed those its home market for the first time, hitting 29% of total portfolio value as it added to assets despite the increased geopolitical tensions between U.S. and China.

Temasek was also an early investor in Jack Ma’s Ant Group, whose record initial public offering was scrapped by the Chinese government on the eve of the November listing, 3 months ago.

The Chinese government was clearly not happy with Ma and his companies. It berated Ant for sub-par corporate governance, disdain toward regulatory requirements, and engaging in regulatory arbitrage, according to another report from Bloomberg.

The Chinese central bank said Ant used its dominance to exclude rivals, hurting the interests of its hundreds of millions of consumers. It added that Ant needs to set up a separate financial holding company to comply with rules and ensure it has sufficient capital.

Valued at about US$315 billion before its initial public offering was halted, Ant corralled investments from some of the world’s biggest funds, including Temasek and GIC. The global investors backed the company when it was valued at about US$150 billion in its last round of fundraising in 2018. A break-up of Ant would make the return on their investments uncertain, with the timeline for an IPO that was due in November now pushed into the distant future.

Ant’s payments business alone is said to have left much less to the imagination. While the service handled US$17 trillion of transactions in one year, online payments have largely been loss-making. The two biggest mobile payments operators, Ant and Tencent, have heavily subsidized the businesses, using them as a gateway to win over users. To make money, they leveraged the payments services to cross sell products including wealth management and credit lending.

“Ant’s growth potential will be capped with the focus back onto its payments services,” said Chen Shujin, a Hong Kong-based head of China financial research at Jefferies Financial Group Inc. “On the mainland, the online payments industry is saturated and Ant’s market share pretty much reached its limit.”

Temasek’s and GIC’s investments in Ma’s Ant Group are now stuck until Ma could sort out the mess with the Chinese authorities.

Meanwhile, Temasek’s net portfolio value fell for the first time in four years to S$306 billion in the last fiscal year, after financial markets crashed during the early phase of the pandemic last year.