Two months ago, Temasek reported a one year shareholder return of 19.2% for FY 2015. Its portfolio value (PV) increased by $43 billion to $266 billion and as usual, Temasek reported an unbelievable 16% compounded return since 1974.

On closer scrutiny, most of the $43 billion increase came from its 10 largest listed investments valued at about $112 billion on 31 March 2015 (table below). With the recent market correction, the market value of these 10 investments have fallen by $22 billion or about 20%.

. Name S$ (bil) 31-Mar 25-Sep Decrease % S$ (bil) Dec
1 Singtel 36 S4.38 3.64 0.74 17 6.1
2 DBS 14.6 $20.36 16.77 3.59 18 2.6
3 CCB 14.5 HK6.44 5.24 1.2 18 2.6
4 Standard 9.7 1093p 660 433 40 3.9
5 SIA 7.8 $11.95 10.61 1.34 11 0.9
6 ICBC 7.6 HK5.72 4.52 1.2 21 1.6
7 Capitaland 6 $3.58 2.79 0.79 22 1.3
8 Alibaba 5.7 US$83.24 60 23.2 29 1.7
9 S Tech Eng 5.5 $3.48 2.88 0.6 16 0.9
10 Level 3 Com 4.7 US$53.84 44 9.84 18 0.9
. Total 112.1 . . . . 22.5

Extrapolating from the above figures, Temasek could have already lost the entire $43 billion gained in FY 2015. What’s worrying is some of its investments in China’s financial institutions.

One example would be China Construction Bank (CCB) whose value was $14.5 billion in October last year. In 7 months, its market value shot up by $7.1 billion, only to fall by $8 billion during the next 4 months.

Source: Yahoo

The stock market bubble was caused by speculation fueled by a series of interest rate cuts, the Chinese media and government. Weeks before the spectacular stock market collapse, up to 4 million new trading accounts were opened weekly. On April 21, the Chinese government provided a rocket booster with the state-run People’s Daily declaring the Shanghai Composite Index’s surge past 4000 on April 10 was “just the beginning of the bull market”.

Why does Temasek prefer to invest in China instead of developed countries despite much higher risks?

And it’s not just CCB but almost all investments have experienced a collapse in value.

Last year, DPM Tharman had given the assurance that the three Singapore investment entities would not take on more investment risk even if their returns are low. ???

Temasek doesn’t seem to have learnt any lesson from its billion-dollar losses in Merrill Lynch and Barclays during the last financial crisis. It has merely relocated it speculative activity from UK and US to China. Worse, investments in China have increased to 27% of its portfolio. With profits falling and bad debts rising, Temasek’s investments, particularly in China, may be underwater for a long time.

Global stock market recovery has been based on central banks injecting trillion$ in liquidity and has little to do with improving fundamentals. Stock markets seem to have signaled a sharp correction ahead and the likelihood of Temasek’s portfolio being wiped out is increasing by the day.

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