The media reported today (7 Jul) that Temasek Holdings would likely be reporting a lower performance in terms of its returns for last financial year.

This is due to the lacklustre performance by Singapore stocks and Chinese bank counters over the past year. Presently, Chinese banks and Singapore stocks make up a major component of Temasek’s portfolio.

According to CIMB Research, Temasek may have increased the value of its holdings by about 4 percent to a record $224 billion in the year to March 31.

China Construction Bank and Industrial & Commercial Bank of China are among the top four bank stocks in Temasek’s portfolio. The share prices of Chinese banks declined as China’s economy heads for the weakest expansion in 24 years amid rising debt and a clampdown on shadow banking.

China Construction Bank lost 13% in Singapore dollar terms, while Industrial & Commercial Bank of China fell 11%. Standard Chartered lost 18%. Temasek’s stake in China Construction Bank alone was valued at $17.8 billion as of March 31 and comprises 8% of its total portfolio.

Analysts estimated that financial firms made up 31% of Temasek’s total holdings as of March 2013. “They (Temasek) built up very big stakes in the Chinese banks, and it’s now going to be very difficult to divest that without making a loss,” one analyst said.

Also, Singapore’s Straits Times Index (FSSTI) lost 3.6% in the 12 months through March. Temasek is the biggest shareholder in about a third of the 30 members in the index. Its biggest listed holding by value, Singapore Telecommunications Ltd, rose 1.7%. DBS gained 1.1%. SIA lost 3.7% during the period.

China accounts for 23% of Temasek’s portfolio, second only to Singapore’s 30% in terms of country mix, according to its annual report last year.

According to Temasek’s website [Link], its Total Shareholder Return (TSR), which measures compounded annual returns, including dividends but not capital injections, for the financial year ended 31 March 2013 (in Singapore dollar terms):

1-year TSR was 8.86%
3-year TSR was 4.94%.
10-year TSR was 13%
20-year TSR was 14%
30-year TSR was 15%
since inception in 1974, TSR was 16%
Average risk-adjusted hurdle rates for Temasek have been around 8-9% through the years. Annualised core inflation in Singapore has been about 2.0% over the past 10 years, its website said.

However, Temasek had a negative return of 30% in the year ended March 2009.

According to the website of the Institutional Investor’s Sovereign Wealth Center, Temasek is the world’s 10th-biggest state investor. GIC ranks 5th. The world’s biggest is Norway’s Government Pension Fund Global, with an estimated US$869 billion of assets under management.

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