Temasek faces potential loss of hundred of millions from its investment into Chinese tech companies as China bans for-profit-tutoring

Singapore’s sovereign wealth fund Temasek Holdings poured millions into several Chinese technology platforms and disclosed its stake in ride-hailing service Didi Global, ahead of a collapse in some Chinese stocks in July.

Temasek’s 13F filing with the US Securities and Exchange Commission (SEC) on Monday (16 Aug) stated that it has initiated four new positions in the depositary shares of Chinese companies — 17 Education & Technology, Baidu, Kanzhun, and New Oriental Education Technology — in the second quarter and has disclosed a US$466 million stake in Didi Global.

South China Morning Post reported that Temasek’s 13F filing outlined 99 companies with a market value of US$34.3 billion at the end of June, which is an increase of US$8.8 billion from 31 March.

However, many of Temasek’s listed Chinese investments have plunged amid regulatory pressure in China, while shares of Chinese education companies also sank after China banned for-profit-tutoring firms.

Didi Global’s shares, in particular, are down 42.64 per cent since 30 June. The Cyberspace Administration of China (CAC) announced on 2 July that it had launched a cybersecurity review of the firm.

Temasek acquired stakes in New Oriental Education and Technology Group (US$13.6 million) and Tal Education (US$302 million) as of the end of June, but they fell 77.05 per cent and 79.39 per cent, respectively.

Overall, Temasek held a total of US$562 million stakes in six Chinese tech companies — Didi Global, New Oriental, TAL Education, Baidu, Kanzhun, and Pinduoduo — at the end of June, which have been plummeting in value.

Temasek's total loss stemming from the dip in shares of these six companies is estimated to be more than US$224.25 million.

According to Bloomberg's report, Temasek may have trimmed its stake in these companies since the end of June and before the collapse in their share prices.

SCMP quoted Temasek’s reply to the Post’s queries on Tuesday, in which it said that the firm’s global investments were guided by “an intrinsic value test” where it invests “against a risk-adjusted cost of capital”.

“Didi‘s previous disclosure indicated that we, as an existing investor, had participated in the company’s IPO,” said the firm, though it declined to comment further.