Singapore's Temasek To Invest $30B In US Over Next Five Years, Remains Cautious On China

Singapore's state investment firm Temasek is planning to invest up to $30 billion in the U.S. economy over the next five years as it aims to focus on healthcare, financial services, and technology sectors.

Temasek's head of North America operations, Jane Atherton, said the robust opportunities within the U.S. capital market, particularly in artificial intelligence, as the main reason to make the big investment.

"It's an incredibly deep and broad capital market in the U.S.," Atherton told Reuters.

"The U.S. is really at the forefront of everything that's happening from the AI perspective."

The investment comes following the U.S. economy's robust performance, which outpaced global peers in the second quarter, bolstered by a 14.5% rise in the S&P 500, driven partly by AI advancements.

In contrast, China's recent economic reports showed weaker-than-expected growth, prompting a reduction in major interest rates to stimulate its economy.

Currently, 22% of Temasek's $288 billion portfolio is invested in the Americas, amounting to $63 billion, surpassing its 19% allocation in China for the first time in a decade.

Temasek's interest in the U.S. includes AI-related sectors such as data centers, semiconductors, and battery storage.

The firm recently said its profits from U.S. and Indian investments are offsetting slower performance in China, where Temasek adopts a cautious investment strategy amid ongoing trade tensions.

"Geopolitics always plays a role," Atherton said as she highlighted China's underperformance relative to the U.S. over the past three years.

Temasek's investment approach focuses on long-term themes like digitization and sustainability as it aims to capitalize on growth trends within these domains.

Atherton also added that future performance of U.S. stocks, especially in the tech sector, will heavily depend on earnings growth.

"You've seen some multiple expansion, but that's been driven by higher growth, and in theory it'll pay for it," she said.

In addition to public market investments, Temasek is exploring opportunities in private markets, with an eye on potential divestments from private equity firms.

It has significantly shifted its investment strategy over the years, moving from public equities to private markets. As of March, unlisted assets comprise 52% of its portfolio, a substantial increase from 20% in 2004.

However, Temasek executives caution that the landscape is changing and the rise in interest rates has challenged the debt-driven models that many private equity funds rely on, potentially leading to lower future returns.