Temasek Holdings recently reported a net portfolio value of $308 billion, up by 12% from $275 billion in 2017. As the country’s institutional investor, Temasek knows that it has no room for failure. After all, the funds generated by Temasek’s investments are used to supplement Singapore government’s budget spending and for growing our national reserves.
Thus, identifying global trends is critical in guiding investments towards a better, smarter and more connected world in the long term. At the recent annual Temasek Review 2018, Temasek shared the 6 key global trends that has guided and will continue to guide its investments.
Looking at Temasek’s newly invested companies, you will see that a common theme is that they are innovative, and have the potential to create new markets based on the identified trends. Unfortunately for you and me, these companies are mostly not publicly-listed.
What we can do, is to look at similar listed companies that leverage on the same opportunities that may reap similar benefits in the long-term. If you invest for the future, like Temasek does, then you too can learn to ride on these global trends.
# 1 Longer Lifespans
Over the past few decades, life expectancy has been increasing globally with better technology and medical advancements. Opportunities created due to longer lifespans have led Temasek to make new investments in unlisted biopharma companies such as Tessa Therapeutics, a Singapore-based biopharmaceutical company focused on T cell therapy for solid tumours.
By drawing parallels between longer lifespans and a prominent phenomenon in Singapore – ageing population, investors can see that there are also other listed stocks up for grabs.
An example of a listed company that you might want to look at is IHH Healthcare Berhad (SGX: Q0F). It is the second largest healthcare group in the world by market capitalisation, with recognised brands such as Mount Elizabeth, Gleneagles and Shenton Parkway in its portfolio. CIMB named IHH their top large-cap pick for 2018 amongst SGX-listed healthcare stocks in 2018.
Since IHH provides private healthcare services, the 2020 Healthcare Masterplan that emphasises primary care would less likely affect the company.
# 2 Rising Affluence
Longer lifespan brings about a greater emphasis on retirement planning. Luckily for us, people are getting richer around the world. On a global level, wealth is projected to rise by 3.5% every year. Zooming in, Singapore’s total household wealth is expected to rise by 2.9% every year, despite our slowing economy.
Perhaps we can look at this trend from another angle on how rising affluence may actually drive demand for insurance. More than two-thirds of Singapore’s population now has an Integrated Shield Plan (IP) coverage as compared to just 43% in 2006.
Even though insurance companies may not be as exciting for investors, it may a good way to diversify your portfolio. The good thing about insurance companies is their stability. They have been around for at least fifty years and would likely stick around for another fifty and beyond.
Investors might want to look into well-known brands such as Great Eastern (SGX: G07), Prudential Financial (NYSE: PRU) and AIA (HKG: 1299) as candidates to add to their investment portfolio.
# 3 Sustainable Living
Sustainable living is a lifestyle that attempts to reduce an individual or a society’s ecological footprint on our very own planet. Sustainable business is projected to create at least US$12 trillion in new market value by 2020. This is definitely not a trend to miss, as Temasek continues to invest in unlisted companies positioned to meet the increasing demand for sustainability.
For us, we can consider listed companies like Tesla (NASDAQ: TSLA). Aside from the 3.5% drop in stock price following Elon Musk’s attack on the Thai cave diver, Tesla seems to have a strong long-term outlook. Perhaps it is a good time to green your investment portfolio now.
# 4 Smarter Systems
On the other hand, technological advancements have led to the creation of smarter systems. Traditional processes are digitalised for greater efficiency. Temasek’s new portfolio consists of Global Health Exchange and Intapp, two companies in this arena.
Rather than looking at the unfamiliar companies that create these smart systems, we can look at well-known companies that embrace such digital transformation instead.
Banks in Singapore are prime digital transformation examples as financial technology (fintech) continues to thrive in the finance ecosystem. Mobile banking allowed users to transfer and handle money without going to the bank and apps like DBS Paylah! and PayNow make peer-to-peer (P2P) money transfer as easy as just a few taps on the phone.
In the long run, investing in banking stocks may be well-rewarded as the outlook and prospects of the banking sector remain rosy.
# 5 The Sharing Economy
Tech startups have performed exceedingly well in recent years. As the world shifts to a more collaborative society, we see new P2P platforms emerge every single day to cater to society’s different needs. Just think about how our lives have changed. From booking a private car on Grab to work to buying groceries on Redmart and booking rooms on Airbnb, it’s as if these platforms are ingrained in our society now.
Temasek rode onto the trend and invested in Indonesian-based ride-hailing company Go-Jek and American hospitality platform Airbnb. Likewise, many of these firms across sharing economies are privately owned, so it may be a potential hurdle to investors.
Strategists offered some ideas for investors to gain exposure to the sharing economy through some publicly-traded stocks. They considered companies with sharing-economy-related “technologies, services, and solutions”. Some of these companies recommended include Netflix (NASDAQ: NFLX) and Box (NYSE: BOX).
# 6 A More Connected World
Companies that drive digital connectivity and solutions are popping up all over the world. Fueled by the internet of things, these companies work towards enabling connectivity in nearly every product category (think self-driving cars and digital health).
Temasek made a new investment into Tencent (HKG: 0700), a leading provider of internet value-added services in China. If you have never heard of Tencent, look at its portfolio. They are the company behind well-known web portals QQ.com and mobile chat service WeChat.
Tencent aims to strengthen its position in areas including online video, payment services, cloud services, AI technologies and smart retail. As of January 2018, the company has a market value of US$580 billion.
Invest Today, With An Eye Towards The Future
Investors like you and me can learn from how Temasek analyses global trends to guide their investments. We can look for underlying patterns across these trends and search for companies that may benefit or are adapting to these overarching trends.
However, we should note that Temasek probably has a longer investment horizon than any of us. Consider whether you have the time and willingness to commit to your investments before deciding whether you can afford to ride the same trends.
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