Temasek Holdings A possible bad year for Temasek Holdings
Temasek Holdings had written off US $275 million in its investment in FTX.

During the past 15 years, TH had incurred large losses in some of its investments. In 2008, TH wrote off its $400 million investment in ABC Learning Centers in Australia.

There were other bad investments, which raised much concern in the past.

Personally, I was not concerned about these large losses. For a large fund, there will always be some bad investments. They would be covered by the gains on good investments.

The correct approach is to look at the performance of the entire portfolio, and to compare it with the market indices or with the performance of other similar state owned funds.

The latest annual report of TH was for the year ended 31 March 2022. The total portfolio was $403 billion. The 10 year average return was 7%. This would be acceptable.

However, the performance for the current year, which will close on 31 March 2023, and reported a few months after, will probably be very bad.

I read a recent news report from a managing director of TH that the investments in technology, media and telecoms industry had dropped by 50% and the China stocks had dropped by 20%. These two sectors probably account for 40% of the total portfolio.

https://www.ft.com/content/df58785a-2958-42aa-b7f6-1762286b540b

I would estimate that the portfolio values could be written down by 25% in March 2023. The write-down could amount to $100 billion, based on a portfolio of $403 billion. (This is my guess only).

This could bring down the 10 year average return to 4%, which is not so impressive.

Although the loss on FTX looks quite bad, the actual amount may appear to be small, when compared to the possible loss on the entire portfolio.

We have another four months before the close of the financial year. A possible saving grace could come from a recovery of the global stock market. This would reduce the loss for TH.

Tan Kin Lian

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