Temasek hit by first loss in seven years

Temasek’s Head of Strategy Michael Buchanan
Updated 08 July 2016

Temasek hit by first loss in seven years

SINGAPORE: Singapore state investment giant Temasek Holdings said its global portfolio suffered its first annual loss since the financial crisis seven years ago, as global stock markets were hit by a series of China-linked routs.
Temasek announced that the value of its global assets was Sg$242 billion ($180 billion) by March, down nine percent from last year's record Sg$266 billion.
The investment company said its net profit over the past year plunged 43 percent to Sg$8.0 billion.
Equity markets worldwide were hammered last summer by fears over China's economy as Beijing announced a shock devaluation of its yuan currency.
Another rout followed in January and February as questions were again raised about China's outlook and its leaders' ability to handle a long-running growth slowdown.
Both events wiped trillions of dollars off company valuations worldwide.
Temasek said in its annual report Thursday that the outlook was still tough, with the US economy heading for a modest growth path while China continues to see slowing expansion.
Europe's growth outlook has been dented by Britain's surprise vote last month to leave the European Union, it said.
"The external environment will remain quite challenging for Singapore given its intimate links to global trade and demand," Temasek said in a statement.
"However, Singapore's openness also means exposure to both mature and growth economies, which can provide opportunities for a balanced growth in future."
Temasek — a strategic investor that stresses long-term performance rather than year-on-year gains — holds among its portfolio telecoms group SingTel, Singapore Airlines and banking giant China Construction Bank.
Total shareholder return, which includes dividends, was minus 9.02 percent during the financial year ending March, but has averaged 15 percent since Temasek's inception in 1974.
Song Seng Wun, a Singapore-based economist with CIMB Private Banking, said Temasek performed better than expected as he had projected global assets to decline 10-15 percent.
"It's not so bad given the rout in equities in 2015," he said.
Temasek said it made Sg$30 billion in new investments last year but also divested a record Sg$28 billion as the company adjusted its holdings amid the rapidly changing landscape.
Among its major investments was a $540 million injection in Univar, a US-based distributor of commodity and specialty chemicals. Temasek also continued its investments in biotechnology firms.


US-China trade deal gets tepid reception

Updated 27 min 45 sec ago

US-China trade deal gets tepid reception

  • The US Trade Representative office said they expect to sign the phase one agreement in the first week of January
  • US farmers and retailers welcomed the end to the dispute, but also wanted to see more information

WASHINGTON: US officials announced a truce in the trade war with China with much fanfare, but economists and trade experts call it largely a victory for Beijing.
After a dispute that raged for close to two years, with several fumbled efforts at a resolution, the US agreed to cancel planned tariffs and rollback others immediately, without a similar commitment from China to lift tariffs it imposed on the US.
“Pardon me if I don’t pop champagne, but aside from a cessation of continued escalation, there is not much worth cheering,” leading China expert Scott Kennedy said in an analysis of the agreement.
“The costs have been substantial and far reaching, the benefits narrow and ephemeral.”
The US Trade Representative office said they expect to sign the phase one agreement in the first week of January, and issued a fact sheet highlighting key points, including enforcement provisions and improved protection for American technology.
In addition, it includes a Chinese commitment to buy $200 billion more in US goods and services over two years, USTR said.
That would be a significant increase: China imported just shy of $190 billion in goods and services in 2017, so if the target is met it would cut the US trade deficit with China by a third.
President Donald Trump has long railed against the trade imbalance, citing it as proof China is using distorting policies to gain an unfair advantage.
Trump tweeted that Beijing “agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more.”
Alliance for American Manufacturing President Scott Paul said agreeing to remove tariffs amounted to “giving away much of our leverage, while kicking the can down the road on the most meaningful trade issues with China.”
And trade economist Mary Lovely said the deal could only be viewed as a “partial win” which “didn’t move the needle very much.”
“We were kind of on a brink, and we saw the negotiators reach a deal that pulled us back, and I think that is important,” she said of the news Trump canceled the 15 percent tariffs on electronics that were due to hit Sunday.
But the gains in the deal do not compensate for the damage to US farmers and businesses, she told reporters.
“President Trump is desperately trying to get back to where the economy was 18 months ago,” before taking this “unilateral, brute force approach,” Lovely said.
But Kennedy said that in exchange for “only limited concessions, China has been able to preserve its mercantilist economic system and continue its discriminatory industrial policies at the expense of China’s trading partners and the global economy.”
US farmers and retailers welcomed the end to the dispute, but also wanted to see more information.
American Farm Bureau Federation President Zippy Duvall noted that prior to the eruption of hostilities China was the second-largest market for US agricultural products, but dropped to fifth.
“Reopening the door to trade with China and others is key to helping farmers and ranchers get back on their feet,” Duvall said in a statement.
In addition to the collapse in exports, and surge in farm bankruptcies, the US government has paid tens of billions of dollars in aid to farmers to compensate for lost sales — funds that come from tariffs paid by US consumers and businesses.
The National Retail Federation, which has long opposed US tariffs, particularly the last two rounds which hit consumer products in particular, said “the trade war won’t be over until they are eliminated completely.”