Singapore state investor Temasek is reportedly taking a pause on new investments in Chinese tech firms until there is greater visibility on the regulatory landscape.
Singapore’s Temasek is the latest major investor to voice worries about investing in China’s technology sector amid an industrywide crackdown to address a myriad of issues.
«We will probably wait to deploy more capital till we have a little bit more regulatory clarity in that space,» said Temasek’s chief investment strategist Rohit Sipahimalani in an interview with «Nikkei Asia».
«I would expect in the next few months you will have regulatory clarity, and that will shape some winners and losers out there.»
Didi
In July, the Cyberspace Administration of China reprimanded ride-hailing giant Didi by booting them off the country’s app stores two days after its $4.4 billion initial public offering in New York.
«Today the concern investors have is no one knows what is it that the company needs to do to comply,” said Sipahimalani with regards to Didi, which, amongst other tech firms like Tencent and Alibaba, is backed by Temasek investments.
«So therefore, it is difficult to know whether they will be able to, will not, or what the impact on the company will be – so then it becomes difficult to invest.»
Antimonopoly Regulations
One particular area where Temasek is seeking clarity is China’s antimonopoly stance and the restrictions placed on tech platforms.
«Right now, [the Chinese authorities] are asking Alibaba and Tencent to open their platforms, [to] open to each other and the others – you know, what else?» Sipahimalani said.
«Little More Blunt and Quick»
In addition to regulatory focus, Sipahimalani also highlighted the regulatory approach and its impact on the market.
«The Chinese government wants to address things like monopoly power of big tech platforms. They want to address issues around direct data privacy, and they want to address issues of income inequality,» he explained.
«It's just that in China, the way it is being executed has been a little more blunt and quick, and that is why it has created a lot of shocks out there.»
Long-Term Outlook
Despite the current concerns, Sipahimalani notes that China remains a focus for Temasek, including high growth areas like medical technology, biotech, electric vehicles and renewable energy.
«These internet platforms are not going away. They create millions of jobs, so […] I don't think anyone is going to think that they are going to go away, but the framework under which they operate, the rules under which they operate may go through some changes,» he said.
«That may have an impact on value. When there is no clarity about the regulatory rule book, it is difficult to say – is this fair value or not fair value – so I think we would rather be patient and wait.»
According to a performance report in July, Temasek's exposure to China by underlying assets fell 2 percentage points to 27 percent compared to 24 percent for Singapore.
