Addressing the “disappointing” venture into FTX, chief investment officer Rohit Sipahimalani said at the time Temasek decided on the investment, the cryptocurrency firm seemed like one with good technology, rapid growth in market share and “very regulatory-compliant” based on regulators’ checks.
Temasek’s team had also spent time doing its due diligence on FTX but “it’s impossible to always discover fraud”, Mr Sipahimalani added.
Temasek has drawn lessons from the failed investment, he said, such as enhancing its due diligence processes and the operational areas it looks at, especially for high-growth companies.
“We hope that we’d be able to avoid such situations in the future, recognising that fraud is something that is difficult to protect against completely,” said Mr Sipahimalani.
“And we do recognise that early-stage investing will have binary risks and we need to manage (those) risks,” he added.
Asked by a reporter if there was a need for more radical disciplinary action, Temasek’s chief executive officer Dilhan Pillay said the cut in compensation was meted out due to the negative impact on Temasek’s reputation.
“When you have something which affects the reputation, that’s when you take action which might be a little bit more punitive because you want to remind yourself that every time you do something, the issue is not just a financial risk associated with the investment,” he added.
“It’s the reputation risks and we take our reputation very seriously … But if you say (to) take more action, I don’t think it will be warranted.”
Mr Pillay noted that Temasek “is in the business of taking risk” and it accepts “binary outcomes” when it does the underwriting for investments.
“We consider all the risks, the mitigation factors … and we make a judgment call,” he said.
“The question is, does the portfolio do well … (which is) ultimately a combination of different efforts in making those judgment calls … and as long as that’s the end goal and objective and we can hit it, then of course, it is alright. FTX was, I would say, an aberration.”
MAINTAIN CAUTIOUS INVESTMENT STANCE
Temasek ended the financial year in a net cash position, which will provide it with the flexibility to take advantages of opportunities ahead, said Ms Png.
That said, the global economy remains fragile amid intensified geopolitical developments such as US-China tensions and the effects of the Ukraine war. At the same time, monetary policy remains tight globally with high interest rates as inflation remains elevated.
Temasek expects global growth to slow, with recession risks looming in key developed markets, which could be “exacerbated” by shocks such as the earlier collapses in the banking sector.
Back home, the Singapore economy will contend with slowing global growth and elevated inflation.
While China’s reopening could provide some support, the Singapore economy is geared more towards domestic demand in developed markets which could experience a recession. Rising geopolitical tensions will add to the challenge, although Singapore could stand to benefit from diversification of supply chains around the region, both in the near and medium term, it said.
“We maintain a cautious investment stance and expect to invest at a moderated pace this financial year, given the challenging macroeconomic environment,” said Temasek’s chief investment officer Rohit Sipahimalani.
Still, it is ready to step up investments in a market correction on the back of a “strong” liquidity position.
“Amidst an increasingly complex and volatile backdrop, we will stay focused on investing into opportunities that align with our long term structural trends, so as to build a resilient and forward looking portfolio, as part of our T2030 strategy,” said Mr Sipahimalani.
A key pillar of this 2030 strategy is to build a resilient and forward-looking portfolio, which has two components.
The first is a “resilient” component accounting for around 60 to 70 per cent of the portfolio. This comprises Temasek’s core portfolio companies and asset management business, which are “long-term investments with stable and sustainable returns”, said Mr Pillay.
The other 30 to 40 per cent of the portfolio will be a “more dynamic” one that comprises direct investments in various focus sectors, as well as early-stage unlisted companies.
“Our focus for portfolio construction for this decade is to build a portfolio that can withstand exogenous shocks and perform through market cycles, both up and down,” Mr Pillay said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
