Temasek warns Federal Bank on stimulus easing consequences

Temasek, the Singapore-based investment firm owned by countrys government, warned that the unwinding of the US Federal Reserve’s quantitative easing will trigger “a lot of disruption and volatility”. The firm stated concerns of slowing growth: “On the whole, we think the nearer-term outlook is slower growth,” said Chia Song Hwee, head of Temasek’s investment group. “A lot of unwinding needs to be done and that will cause a lot of disruption and volatility,” he said cited by Financial Times, as Temasek presented its annual report.

Temasek reported a 6% rise in the value of its portfolio to a record $169 billion as global markets soared. Investors remain confident of the positive effect of monetary policy easing and a gradual recovery in the US economy, spurred by the housing market.

The Singapore holding’s total shareholder return jumped to 8.9% from 1.5% a year earlier. Operating cash flow rose to $18.4 billion, from $16.8 billion the previous year. Of its total investing portfolio, nearly 30% is in financial services, a quarter is in telecoms, media and technology and a fifth is in transport and manufacturing. Surprisingly, Temasek revealed that three companies – SingTel, Singapore’s biggest telecoms group, Standard Chartered, and China Construction Bank – made up 29% of its total portfolio.

The firm, asked about Chinas financial system, commented that there is a sufficient liquidity in those banks. However, he added, cited by Financial Times: “Growth is slowing and there are some risks in the financial system.” Credit growth in China has been growing this year more than twice as fast as nominal growth, raising concerns that the economy is becoming more dependent on debt.

Temasek made $20 billion of investments last year, contracting from $22 billion a year earlier, and sold $13 billion worth of businesses.