Latest news with #Sipahimalani
CNBC
5 days ago
- Business
- CNBC
Singapore state investor Temasek is rethinking defense as a strategic ESG bet
Defense stocks are booming — and according to one of Asia's biggest investors, allocating capital to the sector doesn't mean having to abandon ESG initiatives. Speaking to CNBC's Martin Soong on Wednesday, Rohit Sipahimalani, chief investment officer at Singapore's state investment fund Temasek, said his team were looking at opportunities in the European defense sector. "Defense is clearly an area where there's going to be a lot of capital spent, and it's an area we are looking to see what opportunities there are," he said. European defense stocks hit a record high on Wednesday, with the Stoxx Europe Aerospace and Defense index jumping around 0.8%. The index has gained close to 54% so far this year, with some companies in the sector more than doubling in value. Temasek's net portfolio value reached a record high of 434 billion Singapore dollars ($338.9 billion) in the year to March 31, up 45 billion Singapore dollars from the previous year. The fund says it applies an Environmental, Social, and Governance (ESG) framework to its entire investment process . Asked on Wednesday if investing in defense contradicts that mandate, Sipahimalani said Temasek would consider carefully whether any potential defense investment aligns with its wider policies. "If you look at defense, it's an issue of national sovereignty right now," he said. "So just like we talk about sovereignty in terms of food security or energy security, I think defense security is a critical part of that. We would invest in companies that are in compliance with the UN treaty on nuclear non-proliferation, invest in companies that are in compliance with [the] laws of Singapore and generally the markets they operate in, and we would look at each one on a case-by-case basis." Defense stocks used to be excluded from many ESG portfolios due to ethical concerns over how companies' products were used by military customers. But as profits soar , orders pile up and European governments plan to drastically increase defense spending , there has been a shift in how willing some ESG-focused fund managers are to increase their exposure to the industry. "I think it would be unreasonable to say, in the context of the world today that companies should not be investing in defense, because I think it's become it's as much a part of in fact, security and sovereignty is as a part, as much a part of ESG as anything else," Sipahimalani told CNBC in Wednesday's interview.
Business Times
5 days ago
- Business
- Business Times
‘Worst of the headwinds are now probably behind us': Temasek on economic outlook
[SINGAPORE] The first half of 2025 was marked by 'very high uncertainty' – from fears of a collapse in artificial intelligence (AI) capital expenditure, to concerns over fiscal tightening in the US and Europe, and tariff shocks from the US. But the 'worst of the headwinds are now probably behind us', said Rohit Sipahimalani, chief investment officer at Singapore state-owned investor Temasek. On AI capex, the 'momentum is back' and 'people are very confident', with estimates of spending now trending upwards, he noted. Fears of fiscal tightening have also eased, as 'most governments globally' are now spending more, he added. As for US President Donald Trump's 'Liberation Day' tariffs, Sipahimalani said tariff levels 'probably (won't) go back' to the peak levels seen during the earlier roll-out. On Tuesday morning (Singapore time), 14 countries – including Japan, South Korea, Malaysia and Indonesia – received letters from the White House detailing their tariff rates, which were largely consistent with those announced by Trump in April. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Sipahimalani and other members of Temasek's senior management were speaking to The Business Times at the investor's annual Temasek Review, which provides an update on its performance, highlights and group financials for the latest financial year. Temasek reported a record net portfolio value of S$434 billion for the year ended Mar 31, 2025, with its one-year total shareholder return (TSR) rising 11.8 per cent in Singapore dollar terms. Its 10-year and 20-year TSRs were stable at 5 and 7 per cent, respectively. Strong balance sheets Looking ahead, 'I wouldn't say there's something which is really staring at us, which says that there's something very negative (that is) going to happen, so we'll see', said Sipahimalani. But even if shocks emerge, Temasek would not be able to control how external events unfold or how stock markets respond, noted deputy chief executive officer Chia Song Hwee. What the investor can do is continue working with its portfolio companies to boost resilience, he said. Temasek continues to stress to its key portfolio companies that they need to have strong balance sheets, said Chia. 'So that also applies to ourselves, right? Maintaining a strong balance sheet so that we can resolve shocks when they come.' Chief financial officer Png Chin Yee elaborated on this point. Since the Covid-19 pandemic, Temasek has worked with its portfolio companies to ensure they have sufficient liquidity and an optimal capital structure, she said, including paring down debt where appropriate. Key companies in Temasek's portfolio include DBS, Singtel, Singapore Airlines, ST Engineering and PSA. 'I think today, they're in a much better position to actually tackle the challenges that are coming through,' said Png. Stress tests conducted annually by Temasek support this view, added Sipahimalani. 'Right now, based on just the last few years… we're very comfortable with the strength of their balance sheets.' US dollar weakening One risk that Temasek is watching closely is the weakening of the US dollar. As the investor reports performance in Singdollar terms, a weaker US dollar creates a drag on returns from assets denominated in USD. Since March, the greenback has depreciated by about 5 per cent against the Singdollar – and that 'has an impact', said Png. However, only around 24 per cent of Temasek's portfolio is exposed to US dollar-denominated assets, and the company also selectively hedges its foreign exchange risks. 'But obviously hedging also has a cost associated with it, so the headwinds from foreign exchange movement is something that we're actually quite mindful about,' Png added. Still, a weaker dollar can offer some upside for US companies with significant overseas earnings, noted Sipahimalani. 'If you can manage to mitigate the currency risk, actually it makes the earnings growth slightly higher,' he said. Opportunities abroad Temasek continues to see opportunities in the US, particularly in the AI space, though these are tempered somewhat by high equity valuations. 'They are high by historical standards, and so you have to be disciplined and make sure that you find the right opportunities,' said Sipahimalani. In China, Temasek has been 'fairly steady' in its capital deployment, with a focus on domestic sectors such as consumer brands and sustainability. One recent investment was in a commercial solar firm that installs solar panels on factory rooftops and similar structures. China is Temasek's third-largest market, making up 18 per cent of its portfolio. The Americas account for 24 per cent, and Singapore leads with 27 per cent. In China, Temasek targets investments that are more 'self-contained' within the local economy, reducing exposure to external shocks, said Chia. That same logic is also applied elsewhere – favouring businesses with a narrower range of outcomes regardless of macroeconomic shifts, Sipahimalani added. This includes companies serving large domestic markets, such as hospitals, banks and consumer brands in India. 'None of that really gets impacted by what's happening in global geopolitics as such,' he said.
Business Times
5 days ago
- Business
- Business Times
Temasek shifts early-stage focus ‘a little more' towards larger startups, after FTX and eFishery setbacks
[SINGAPORE] Temasek is steering 'a little more' of its early-stage investments towards startups at the Series C and D stages, following tighter due diligence standards introduced after the high-profile failures of eFishery and FTX. The updated requirements include deeper integrity checks, a push for companies to be audited by Big Four firms, and efforts to ensure independent directors are in place to provide oversight, said chief investment officer Rohit Sipahimalani. Early-stage investments remain capped at 6 per cent of Temasek's overall portfolio. However, later-stage companies within this category are now receiving more capital. With the larger startups, it is more realistic to ask them to have Big Four auditors or independent board members, said Sipahimalani. 'The levels remain similar in the last two, three years, but the quantum has shifted a little more towards Series C and D – (a) little later stage within that early-stage bucket,' he said. He was speaking to The Business Times at the Singapore state-owned investor's annual Temasek Review, together with other senior executives. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up In late 2024, eFishery – one of Indonesia's most prominent startups, backed by Temasek, SoftBank and others – was found to have inflated revenue and profit figures over several years. Temasek also wrote off its US$275 million investment in cryptocurrency exchange FTX in November 2022. FTX founder Sam Bankman-Fried was sentenced to 25 years in prison in March 2024 by a US judge for stealing US$8 billion from customers. The investment into eFishery took place before Temasek's updated due diligence framework was fully rolled out, said deputy chief executive officer Chia Song Hwee. Despite the risks, early-stage investments remain a necessary part of Temasek's approach, he added. Chia said: 'Otherwise, we could be blindsided or surprised by (a) turn of events where our portfolio is not adequately positioned to deal with it.' Early-stage exposure enables the firm to 'look around the corner' and anticipate emerging technologies, he added.
