Temasek Holding Pte’s holdings in China surpassed its home market of Singapore for the first time following gains in companies including Alibaba Group Holding Ltd, according to the state investor’s annual report.

Temasek's 29 percent exposure to China, which includes stakes in Industrial and Commercial Bank of China Ltd and Meituan Dianping, compares with 17 percent in North America and 10 percent in Europe

Temasek’s exposure to China rose to 29 percent of assets as of March 31, compared with 24 percent for Singapore, the lowest exposure for its home market since the company was formed in 1974. The firm’s biggest local holdings, from Singapore Telecommunications Ltd to DBS Group Holdings Ltd, saw their valuations tumble this year as COVID-19 hit global markets.

The investment giant has been adding to assets in China despite the rising risk of a political and economic decoupling from the US. Its exposure to China, which includes stakes in Industrial and Commercial Bank of China Ltd and Meituan Dianping, compares with 17 percent in North America and 10 percent in Europe.

ALSO READ: S'pore's Temasek joins Facebook-backed Libra Association

Trade Risks

BlackRock Inc and Temasek in August received approval to jointly build an asset-management business in China with China Construction Bank Corp. - the latest of several pushes by the Singaporean investor into the country’s financial services industry.

Other China holdings include a stake in Alibaba-affiliate Ant Group, which is set to go public in Hong Kong and Shanghai this year, seeking a US$225 billion valuation, according to people familiar.

“We are happy to participate in their journey,” said Temasek Deputy Chief Financial Officer Chin Yee Png, who declined to comment on the IPO specifically.

“We do like what they are doing in the Chinese financial services space, providing inclusive finance to a large swath of the population that previously may not have had access to credit,” Png told reporters in a briefing Tuesday. “There is quite a lot of potential for Ant going forward.”

ALSO READ: Reuters: Temasek, Trustbridge eye WeWork China buyout

Geopolitics is understood to be one of the reasons behind the state-investor’s decision to swap half of its stake in Alibaba from US shares to Hong Kong-listed stock - a move that was also made by several major investors in an effort to mitigate any potential fallout from sanctions against the e-commerce giant.

Cash Pile

Temasek has considerable cash on its balance sheet, but will be “selective” in making investments given the current uncertainty, Png added. She said the recent investment in BlackRock is an example of the deals they are seeking.

Temasek in July reported its worst result since 2016 with a portfolio decline of 2.2 percent for the year ended March 31. Its net portfolio value fell to S$306 billion (US$224 billion) compared with S$313 billion a year earlier

Temasek in July reported its worst result since 2016 with a portfolio decline of 2.2 percent for the year ended March 31. Its net portfolio value fell to S$306 billion (US$224 billion) compared with S$313 billion a year earlier.

The state-owned investor had been on track to deliver a positive return during its first three quarters but the coronavirus pandemic caused global markets to crash in March. Many public equity markets have bounced back since then, though any gains will be included in the company’s fiscal 2021 results.

ALSO READ: Temasek says China to stay major focus

Temasek International Pte Chief Executive Officer Dilhan Pillay had previously said that the market rebound should be viewed with caution with “COVID-normal” being more complex for investors, alongside a lower-returns environment and geopolitical uncertainty.

Finance Holdings

Investments in financial services were the largest component of its portfolio, making up 23 percent of assets. About 48 percent of its holdings are in unlisted assets - up from 42 percent recorded last year - with the bulk of the rest in publicly listed shares. The company added to its stakes in PayPal Holdings Inc, Visa Inc and Mastercard Card Inc. New technology investments included Duck Creek Technologies in the US, and Kuaishou Technology and MiningLamp in China.

Some of Temasek’s biggest holdings have been heavily affected by COVID-19, with the state investor backing capital raising for some of the country’s biggest entities. Singapore Airlines Ltd, which is majority-owned by Temasek, last month said it’d spent half of the S$8.8 billion it raised through share sales in two months.

READ MORE: Singapore Airlines braces for another record loss on virus

Its Heliconia Capital Management Pte unit was also in talks to help fund local shipping line Pacific International Lines Pte, which is struggling to cope with the steep decline in global trade.

Temasek is the majority shareholder in Singapore Telecommunications, whose shares have dropped by a third this year. It’s also the biggest investor in DBS, Singapore’s largest bank, which has dropped about 20 percent on the year.

Not all of Temasek’s deals have survived COVID-19. Last month it scrapped a S$4 billion bid to buy a majority stake in Keppel Corp after the oil-rig builder posted a second-quarter loss that was large enough to trigger the Material Adverse Change clause.