Temasek says China liquidity crunch won’t hit its holdings

PUBLISHED : Thursday, 04 July, 2013, 3:19pm
UPDATED : Thursday, 04 July, 2013, 10:59pm

Singapore state investor Temasek Holdings said it does not expect last month’s liquidity crunch in Chinese banks to have an impact on its banking investments in the world’s second-largest economy.

“There is sufficient liquidity in the system, so we are not concerned abut a liquidity crunch over a prolonged period,” Chia Song Hwee, head of Temasek’s investment group and co-head of China, told a news conference on Thursday.

“The banks that we have invested in, they are actually very well capitalised.”

Temasek counts China Construction Bank as its second-largest investment with an 8 per cent stake in its portfolio. It has also invested about US$2.4 billion in Industrial and Commercial Bank of China since last year alone.

Chinese banks suffered an unprecedented cash crunch last month after the Chinese central bank allowed rates to shoot to record highs to punish banks for making risky loans and to force them to curtail dodgy lending.

Temasek also said it plans to step up investments in the United States and Europe and could take advantage of a restructuring in China by investing further in the world’s second-biggest economy.

The city-state’s second-biggest sovereign investor reported an 8.6 per cent rise in its portfolio size to a record S$215 billion (HK$1.3 trillion) in its last financial year that ended in March, helped by a rebound in Asian shares.

“We are, however, seeing increasing opportunities in the United States and Europe that are beneficiaries of the growth in other geographies, and are likely to step up our pace of investments in these markets,” Temasek said in its annual review on Thursday.

It also said structural changes in China’s economy will create investment opportunities in state-owned enterprises and the private sector.

Temasek - headed by Ho Ching, the wife of Singapore’s Prime Minister Lee Hsien Loong - is a major global investor, holding stakes in firms such as Singapore Airlines and Standard Chartered Bank.

Temasek, which invests mainly in Asia, said its net profit edged down to S$10.6 billion from the previous year’s S$10.7 billion.

Singapore’s AAA-rated wealth fund said 30 per cent of its portfolio was in Singapore as of the end of March, 23 per cent in China and 13 per cent in Australia.

Focusing on European companies with global operations, Temasek paid $779 million for a 5 per cent stake in German chemical maker Evonik Industries and $1.35 billion for an additional 5 per cent stake in Spanish oil group Repsol.