Investment Concerns Given recent Political Developments in US and Uncertainties in Europe
Ministry of FinanceSpeakers
Summary
This question concerns MP Liang Eng Hwa’s inquiry regarding whether political developments in the US and Europe impact the long-term investment outlook and returns of Singapore’s reserves. Minister for Finance Heng Swee Keat acknowledged increased global uncertainty but noted that GIC and Temasek maintain a long-term orientation to target sustainable returns beyond short-term market volatility. He explained that these entities regularly review their strategies and operate under a governance framework where professional teams and boards make independent investment decisions without government intervention. The Government instead ensures accountability by appointing well-qualified individuals to the boards to provide oversight of overall performance. This framework allows management to focus on optimising long-term returns while remaining resilient through periods of global crisis and uncertainty.
Transcript
30 Mr Liang Eng Hwa asked the Minister for Finance whether recent political developments in the US and political uncertainties in Europe with upcoming elections raise concerns on the long-term investment outlook and whether it will affect the returns of our reserves.
Mr Heng Swee Keat: Recent political developments have, indeed, increased uncertainty around the world. We are seeing structural issues that could signal a more challenging investment outlook. In many developed countries, productivity growth has remained subdued since the Global Financial Crisis, while demographics pose long-term challenges. In emerging countries, reforms have been intermittent and the overall pace has been uneven across different countries.
In the short to medium term, political developments across the world, including recent actions taken by the new US Administration and various elections coming up in Europe, have, indeed, raised uncertainty for investors.
That said, this is not the first time that our investment entities have had to face an uncertain future and it will not be the last time. GIC and Temasek, like other global investors, cannot be insulated from volatility in the financial markets.
However, GIC and Temasek are long-term investors. Their long-term orientation enables them to look beyond short-term market volatility and target good long-term sustainable returns on a total portfolio basis. Both investment entities also adhere to the discipline of reviewing their investments regularly and adjusting their strategies where necessary.
Another important aspect is the governance framework. GIC and Temasek have strong professional teams to assess potential investments and take investment decisions. The Government does not intervene in specific investment decisions but, instead, ensures that well-qualified individuals are appointed to their Boards to exercise oversight. This allows the management to focus on optimising long-term returns, while being accountable to the Government through their Boards for their overall performance. This governance framework has served us well through past periods of crisis and uncertainty.