Temasek Wu Yibing: Continued Heavy Position In China Strategy, Regulatory Policy Conducive To Long-Term Risk Control

Temasek, which has maintained a high sensitivity in the turbulent economic cycle, has set record highs in investment and divestment in the past fiscal year. On July 13, Temasek disclosed its latest financial data. According to the financial report, as of March 31, 2021, the net value of Temasek's portfolio was s $381 billion, an increase of S $75 billion over the previous fiscal year. The one-year total return rate of shareholders is 24.53%, and the compound annualized total return rate of shareholders since its establishment in 1974 is 14%.

At the same time, Temasek's investment in this fiscal year was s $49 billion, and the divestment amount was s $39 billion, both reaching a record high“ We dare to invest more in the downward cycle, and the past year has been our biggest investment year. " Wu Yibing, Temasek's co president of global enterprise development and President of China, said.

For this international investment company from Singapore, China's market position is very important. According to the financial report, Temasek's portfolio in China and Singapore accounted for 27% and 24% respectively. China is still Temasek's No. 1 country in terms of position share this year after it became the country with the highest proportion of positions held by Temasek for the first time last year.

"Last year, the epidemic situation in China has been well controlled. We continue to be optimistic about China's economy, and there is no change in the strategy of relocating China. At the same time, from the global market point of view, we are also increasing our investment in Europe and the United States in order to pursue the overall balance of the portfolio, which is a long-term trend. " Wu Yibing said.

Temasek has been in China for 17 years, and its portfolio is changing with the transformation of China's economy. From investing in China's banking and real estate industries at the beginning of 2000, investing in Internet economy, e-commerce and other new trends in the 2010's, and then investing in innovation fields such as sharing economy and artificial intelligence, Temasek's investment includes a number of star companies such as ICBC, Alibaba, Didi Chuxing, Shangtang technology, etc.

Now, in this long list, there are more new consumption head enterprises such as Yuanqi forest“ We are very excited about the rise of a large number of local brands in China. " Wu Yibing told the 21st century economic report. This is not an accidental phenomenon, but a result of changes in consumer demand, supply chain, channels and other aspects. These new consumer enterprises may become industry champions, Chinese Champions and even world champions in the future.

However, in the process of the rapid rise of new consumer brands, how does Temasek view this phenomenon with the same query brought by high marketing investment? What new opportunities does it see in the process of its heavy position in China? In the changing external environment, what kind of value judgment standard does Temasek adhere to? Recently, Wu Yibing and Liu Hui, executive general manager of Temasek in China, received an exclusive interview from the 21st century economic report.

Optimistic about the four structural trends and consumption areas are the focus of this year's development

21st century: what structural trends Temasek is optimistic about and what investment opportunities are there? Since this year, Temasek has recently increased its investment in new consumer enterprises such as Yuanqi forest. What are the main considerations?

Wu Yibing: our investment in China and around the world is mainly focused on four structural trends: digital process, sustainable life, new consumption in the future and longer life span. Digital process and sustainable life affect all aspects of all walks of life. The two trends of future new consumption and longer life span reflect the structural change of consumption mode and the changing life cycle related needs of people and society.

Consumption is indeed the focus of our efforts this year. From the perspective of the demand side, the emerging post-95 and z-generation are rising, and their consumption habits have changed. Because they are digital aborigines, coupled with the growth of overall living standards and disposable income, the soil for consumption upgrading has been brought. At the same time, the young consumer groups do not have the trust in domestic brands as in the past, and they are willing to pay for high-quality Chinese brands.

From the perspective of supply side, emerging brands like Yuanqi forest are born into digital enterprises. They have a deep understanding of customers through digitization, and then enable the supply chain to produce products that truly meet the needs of consumers. Moreover, China has the most complete supply chain in the world and is able to produce high-quality products, which has led to the outbreak of new consumer brands.

Therefore, we believe that the rise of a large number of new Chinese consumer brands is not an accident, and we are very excited about it. These new consumer enterprises may become industry champions, Chinese Champions and even world champions in the future.

21st century: the rise of new local consumer brands is indeed gratifying, but at the same time, the high marketing investment of these brands on platforms such as xiaohongshu and shuoyin is often criticized by people. What do you think of this phenomenon?

Wu Yibing: investment in the new media channel platform is necessary for new brands. Because when building a new brand, the biggest problem is cold start. It is impossible for new brands to advertise on traditional media channels like mature brands, which is too expensive. Shuo Yin and xiaohongshu provide a very good channel for precise delivery, so that new brands can accurately reach the target groups.

Digital marketing gives good products a chance to come out, and also gives good products a chance to be different from bad products. For investment institutions, we can also analyze the data after desensitization to understand the source of brand repurchase, such as push repurchase, social media information repurchase or spontaneous repurchase. If a brand needs long-term continuous marketing promotion and does not form a spontaneous repurchase, it will not get the long-term favor of capital.

21st century: in the financial sector, Temasek has invested in FNZ, a British wealth management platform, and nium, a Singapore start-up that assists in global digital payment and card issuance. So what do you think of China's financial technology innovation opportunities?

Wu Yibing: Temasek is a large-scale investor in the financial industry and technology industry. We have a profound understanding of financial technology and technology finance. The essence of finance is the management of risks, and it is an industry with strong supervision. Therefore, Temasek will emphasize that we only invest in licensed financial institutions, so we have not invested in P2P companies.

At the same time, technology can improve financial efficiency, which is a long-term theme and the theme of our investment. For example, in the past, many small and medium-sized enterprises could not get loans. Now, because big data technology makes risk pricing more accurate, small and medium-sized enterprises can get loans more easily, which has promoted the overall efficiency of the industry. So, we continue to be optimistic about the fintech track.

Enterprises should cooperate with regulatory policies to strengthen corporate governance

"21st century": since this year, some companies in the education industry and Internet companies have had prominent problems in corporate governance, and a series of strong supervision has been carried out in China. As a large international investment company, how does Temasek look at the current regulatory policies and how does it study and judge the future market development trend?

Wu Yibing: for Temasek, our investment behavior has not been affected. Because we have invested heavily in China for many years, we also understand the purpose of regulatory policies. In July this year, regulatory policies of various departments were introduced in a centralized manner, which has both inevitable and accidental reasons. The inevitable reason is that the focus of China's economic development has shifted from short-term growth stimulus to long-term risk control.

For the financial sector, the financial sector and the entity regulatory authorities, the formulation of regulatory policies is to consider the long-term and more stable development, which will pay some short-term costs to a certain extent. We have sufficient communication with the regulatory authorities, and we can also see the specific fundamentals of each enterprise. We should have a deeper understanding of the facts, so the investment behavior has not been affected.

But for investors in the global secondary market, they may explain this phenomenon from a negative perspective under uncertainty. This led to a panic sell-off in the first week of July. According to the latest report released by Goldman Sachs, China capital stock has fallen by 34% since its peak in February, which is larger than the 33% decline in 2018. In contrast, technology stocks in the United States rose 14% over the same period, which is a big change in the capital market. Because of the same company, the valuation is 50% different. For the government, more communication with the capital market can make the market understand the original intention and long-term goal of policy-making more clearly.

21st century: specifically, how to look at the government's regulatory policies on the education and training industry. Temasek has also invested in ape coaching. Is the development of the company affected?

Liu Hui: in the education and training industry, the starting point of these policies is to standardize the industry, whether it is to crack down on excessive marketing and false publicity, or to require employment with certificates and control advance collection. We are also asking and urging the invested enterprises to cooperate with the supervision as much as possible.

At the same time, the trend of technology enabled education has not changed. For example, through the online education platform, students in the fourth, fifth tier cities and even rural areas can have access to high-quality teachers in first tier cities. For example, AI adaptive learning can improve students' interest in learning and learning efficiency.

21st century: Temasek has invested in ant financial services. What is its expectation for its future development?

Wu Yibing: I hope that the company will continue to play a better role in the scope of supervision and licensing business. We believe that although there will be fluctuations in enterprises with strong scientific and technological capabilities, there will be value-added in the long run. We have not withdrawn from the investment and shareholding of ant financial services.

21st century: Temasek has emphasized the practice of ESG concept in recent years. How has this investment decision-making level been implemented?

Wu Yibing: Temasek has set an initial internal carbon price of US $42 per ton of carbon dioxide equivalent, which has been taken into consideration in investment decision-making. When we invest in an enterprise, we will convert the cost of carbon emissions into the cost of capital to see how much the connotative value of the company is.

Although the market does not give a carbon premium to solar energy companies with negative carbon. For coal enterprises, it is not affected by the cost of carbon emissions. But in the long run, carbon emissions will affect the value of enterprises. So we start to consider the carbon emissions of enterprises now, which is not only the embodiment of social responsibility, but also has long-term economic value.

?