Despite the plunge in China’s tech stocks, Singapore’s state-owned investment company Temasek Holdings remains keen on China's tech stocks despite the current sell-off.
Rohit Sipahimalani, Temasek’s chief investment officer and head of Southeast Asia, said the company is continuing to invest in technology stocks in China.
«That's the second-largest economy in the world. It's one of the fastest-growing large economies of the world. I mean, you cannot not be invested in China,» he said in a televised interview with «Bloomberg» on the sidelines of the Milken Institute Global Conference in Los Angeles on Wednesday.
Shifting Stance on China
The stance marks a shift from November 2021, when Sipahimalani said in an interview with «Nikkei Asia» that Temasek would pause its new investments in Chinese tech firms until there is more regulatory clarity.
That clarity may be on the way given China’s Politburo said last week it would step up policy support for the economy, including the «platform economy,» according to a Reuters report. China’s top leaders are also planning a symposium to meet with tech companies, including Alibaba, Tencent, and TikTok owner ByteDance, the report said, citing people familiar with the matter.
Sipahimalani noted many China internet companies' shares have been beaten down, and as policy clarity emerges over the next few months, there will be «attractive opportunities» for investments.
«Align With Policy»
In making China investments, Sipahimalani said it was important to be aligned with policy by focusing on national priorities.
«For example, in areas like biotech, where we invest, it’s clearly a major focus area for drug development within China. Or you’re talking about in sustainability, whether it's EVs, it's the largest single market in the world for battery technology, manufacturing, solar panels, [and] general consumption,» he said.
«Spheres of Influence»
Sipahimalani noted also that the world is becoming increasingly bifurcated, with Russia’s invasion of Ukraine accelerating change.
«You have to look at businesses whose markets are within the China economic sphere of influence as against the Western economic sphere of influence, and the fact that these businesses should not be relying on technology or other things from the other camp,» he said. «Keeping these parameters in mind, I think there definitely continue to be attractive opportunities in China.»
Pressure on China’s Techs
China’s tech stocks have seen sharp losses since 2020, when the mainland began implementing regulations, ostensibly overdue, on new technology areas that had been allowed to engage in a so-called «Wild East» strategy. Indeed, the public reason Alibaba’s financial arm Ant Group's Hong Kong and Shanghai IPO plans were squashed in 2020 was due to concerns about regulating the company as a financial firm, rather than a technology one. The suspension came just after China had drafted new rules for microlending online.
Some of the pressure on Chinese companies came from the Trump administration’s trade war against China, seen as haphazard by some, and which included efforts to force mainland companies to delist from U.S. markets. China’s response may have amounted to taking its own ball home from the game by ostensibly leaving U.S. investment banks without mainland IPO deals.
The sector has since recovered on expectations China and U.S. regulators may be nearing a deal about the sharing of audit information for U.S.-listed Chinese companies - and on Beijing’s recent pledge to provide more economic stimulus and support for developing tech companies. The promise comes as China’s economy faces hit from lockdowns in major cities due to its zero-Covid policy.
Temasek Hit by Selloff
Temasek has also been hit by the sell-off in China's tech stocks. In November 2021, Temasek cut its stake in ride-hailing firm Didi and in Alibaba Group, as well as others.
In June 2021, Didi set its initial public offering (IPO) price at US$14 a share; on Wednesday, the shares, which trade on the New York Stock Exchange (NYSE), closed at US$2.02.
At end-March 2021, Temasek had S$381 billion (US$277.27 billion) in net portfolio value, with around 27 percent of the portfolio invested in China. Sipahimalani said the proportion likely hasn’t changed much since then.
