The following is an edited transcript of questions and answers at the Temasek Review 2018 Media Conference.

It has been edited with grammatical edits to aid readability.  Questions are not necessarily listed in the order in which they were asked, but have been grouped by subject to aid readability.

Slides and charts have been added from the Temasek Review 2018 where they were included in the presentation, or where they contain material helpful to the reader in providing detail to supplement the answer.

Click here to read the transcript of the preceding presentation and accompanying slides, and here to see all of the key financial metrics and diagrams in Temasek Review 2018.

QUESTION: Taking on the point that you mentioned that you may recalibrate and slow your investment pace over the next 9 to 18 months, I would like to have more of your thoughts about the ongoing tensions between the US and China with regard to trade wars. How will that affect in terms of your investment outlook in these economies. Thank you. 

MICHAEL BUCHANAN: Maybe if I start off with just some thoughts on the trade tensions and then others can chime in on the investment moves. So, first of all, in terms of what do we expect on the trade side of things, we don't expect a full‑blown trade war with punitive tariffs on a wide range of goods and a wide range of countries. Clearly that's a risk but that's not our baseline view.  We do think, however, that there will be continued tensions. The tariffs that we've seen imposed so far are relatively small and do not have a huge impact on growth, but obviously we're worried that this could escalate. 

Now one thing in particular that we're watching is whether the tensions go beyond just US and China and then move to other countries as we've seen, to some extent with Canada and Europe, and that's when you would have an increasing risk of the broader trade tension scenario.  

Now, who is going to be impacted by that? Of course, any firm that's doing a lot of cross‑border trade but especially those that have a lot of intra‑industry goods going backwards and forwards multiple times in the production process. Now, we're not invested in those sectors, but that would be one area that would be most impacted.  But, of course, if we go into a trade war scenario it will be a negative impact across a wide variety of markets. 

CHIN YEE PNG: Just to add to that, if we look at China, our new focus area is really around the Chinese consumer. So, a lot of the new investments that we're making are really centred around domestic consumption themes, whether it's in technology, in consumer, meeting the unmet demands of healthcare for the Chinese consumer, so that's really where we've been spending time.

QUESTION: Can I circle back to the macro issue and just pick up where Sulian and Michael left off. What is the possibility that the Fed may now pause in the tightening cycle because of the global uncertainties, the trade‑related spillover, etc?

MICHAEL BUCHANAN: We don't expect the Fed to pause. Of course, if we enter into a recession, clearly they will. If we had a full‑blown trade war, yes, they would. But in the sort of scenario that we expect, the ongoing trade tensions, which would be a little bit of a break on Capex plans and so on, we still think there's enough underlying resilience for the Fed to continue to hike. 

Now, of course, there's an equilibration thing there. If the trade tensions rise, that's a negative but if the Fed were to do less that would offset it a little bit, but the most likely scenario to us is one in which the level of trade tension remains very elevated but the underlying resilience of the US economy still requires the Fed to hike.  

Now, one of the reasons for that, of course, is that we've had this fiscal easing at a relatively late stage in the economic cycle in the US. Normally you would have a fiscal easing to get the economy going again after a recession. This is coming much later in the cycle. When you have very limited spare capacity left in the US economy that complicates monetary policy and so that will be very much, of course, on the minds of the Fed. But our baseline would be that they would continue to hike.

QUESTION: I wanted to ask you've mentioned how the trade war may affect economies but generally countries don't trade, companies do. So, I'm wondering how you expect the already existing trade war or trade tariffs to affect earnings at companies in your portfolio, such as in the technology sector or the industrial sector?

MICHAEL BUCHANAN: Maybe let me kick off and then others can chime in. I mean, what we've seen so far in terms of the tariffs is actually pretty small in terms of the likely impact on growth and on earnings. Now, of course, there will be hits to specific companies, you're absolutely right. You've already seen hits to specific prices as well. If you look at the price in the US of soy beans down and washing machines up, and so on, for example, of course that has an impact, but for our portfolio companies that's not so important.  

But one other point that sort of is, I think, to your general perspective there, that it's sort of about companies and not countries, really.  One thing to consider is that, of course, if you go into a nastier trade scenario there will be a hit to a number of the countries in this region where we are, of course, invested, because supply chains could be disrupted. 

So that would be the first order-effect but if you look further ahead, once all of that is sort of done and dusted, what you might see is other companies, or perhaps sometimes even the same ones, are able to say well, okay, you don't want to keep all of your production in one country, let's say China.  You might want to move some of your production to another country and, you know, we've looked at places like Vietnam and Thailand as being examples that could benefit a little bit from that trade dislocation. So it is a complicated equation when you're coming down to it company level, as you rightly point out.

ROHIT SIPAHIMALANI: We've looked at our portfolio. We stress test our portfolio for different economic environments including a potential trade war and really the primary impact on our portfolio is going to be, if that is an overall trade war which slows down global growth, that is going to have the biggest impact on our portfolio, rather than directly, you know, these trade tariffs.  Because if you look in Asia, which is the largest part of our portfolio, the primary theme we are focused on is the rising affluence in emerging markets.  And most of that is really domestic-based sort of companies. So, the direct impact of the tariff is actually not there, but obviously if it impacts confidence and overall growth in the economy that's where we see the impact.

MICHAEL BUCHANAN: Maybe just one final point in that thinking about this region. When you look at the fundamentals across the region, they are stronger than they've been in the past during periods of stress and crisis and you've seen also lower sensitivity.  For example, when we had the move to higher US rates, and of course that was putting pressure on emerging markets, the sensitivity of the vast majority of countries in this region and indeed in the emerging market asset class, that sensitivity to the rise in US rates was lower than it had been in the past, say the taper tantrum back in 2013. 

I think that's testament to the improved fundamentals. Now, of course there will always be a couple of exceptions to that and we've seen a couple of emerging markets in more significant distress. But by and large that improvement in fundamentals in emerging markets and in this region should stand those countries in good stead.

QUESTION: I have a question. On page 23 [of Temasek Overview 2018] you have your simulation exercise for the returns that can be expected in various scenarios including a global trade war, which I would then assume that would be a full‑blown or fully fledged trade war, as well as a US monetary shock. Now, you had also analysed these factors or run the simulation exercises, similar simulation exercises last year, and when I look at that curve versus this curve then will I be correct in saying that you have probably become more pessimistic and also the range of uncertainty has also probably increased, because that bell was a narrower bell and this seems to have flattened out?

MICHAEL BUCHANAN: Well-spotted, that's absolutely right. I think two things have happened. One is that the characterisation of the trade war, the chance of that being broader and deeper, meaning higher tariffs in more countries, that's more tangible now and the probability that we would assign to that would be a bit higher. As I say, our expectation is not that we enter into a full‑blown global trade war but rather we stay in this period where we have significant trade tensions and of course, look, that has an impact itself, right? If you stay in this period of heightened trade tension, of course that's going to have an impact on corporate investment and confidence, so it's not as though this is a costless thing but we don't expect it to go into that full‑blown global trade war.

QUESTION: My question is on the portfolio value at a record high this year. I know last year the panel sounded a cautious outlook citing medium and long‑term risk, how the global economy is at the early stages of recovery. I want to find out what are the factors or rather surprises that contributed to outperformance in the portfolio value this year.

ROHIT SIPAHIMALANI: I would say we're reasonably more constructive on the outlook for the global economy last year compared to where we are this year and partly because now we feel we're far more late cycle, and Mike's talked about all the reasons why we feel that growth should be slowing down going forward, but to answer your question as to the areas which contribute a lot to our returns this year, clearly banks in the region, in China and elsewhere in the region, have done very well.  That did contribute to our returns. 

We had a couple of investments in Korea, like Celltrion, we did really, really well, but across the board, I would say primarily because of Asia Pacific I think was a key outperformer in our portfolio this year, and that is the largest part of our portfolio.

MICHAEL BUCHANAN: Over the last few years well, we've actually pushed back on the notion that the US was about to have a recession. A lot of people were saying this is one of the longest lived recoveries that we've seen in the US and therefore it's inevitable that we'll have a recession very soon. In past years we pushed back on that because in our view there was still a lot of spare capacity in the US economy. What I mean by that is that there are lots of workers who could come back into the labour market who had been discouraged and that would allow the US economy to continue growing strongly without bringing about inflation and requiring the Fed to hike.  

So we actually did a lot of work on what had driven the decline in labour force participation in US. We found a lot of it was cyclical: these discouraged workers. Now when we look at that what's changed is that's pretty much completely gone so there isn't that spare capacity that's why we're now saying the risk of US recession has gone up. So the view there has changed from last year and previous years. Yes, that risk has risen. 

QUESTION: A follow up from Sri's question earlier about, you know, you guys are focusing on new areas such as ‑ I mean you guys reshaped your investment strategy in 2011 to focus on technology, nonbank financial services, life sciences, agribusiness and the proportion of your portfolio for these sectors have increased 5% in 2011, now 26%. So, for the reverse, what sectors have decreased in proportion in terms of your overall portfolio?

ROHIT SIPAHIMALANI: So, if you look back 10 years ago, you would have seen that the largest portions of our portfolio were financial services and telecom, media and technology. Today they continue to be the largest segments of our portfolio but there's a change in the mix within those sectors. So, within financial services we were almost 100% banks. Now there's a greater proportion, or at least there's increasing investments, as Chin Yee can talk about, in insurance and payments, etc. 

Similarly, in telecom, media and technology, we were primarily telecom and now there's an increasing share of technology. Some of it is just shifts between these broader buckets that you see. Having said that, overall financial services and [telecom, media and technology] have come down a little bit from what they were then and that's been compensated for by some of these sectors where we had almost no presence like Life Sciences and Agribusiness and Consumer, etc.

QUESTION: Do you have like specific figures because you gave the 5% to 26% for the new areas so do you have specific figures for those ‑ like what you said, the changing composition in terms of your financial services and telecom industry? 

CHIN YEE PNG: So maybe I can just address the financial services question.  As Rohit pointed out, almost all of our exposure before 2011 was actually in banks. Today insurance is about 15% of the overall financial services portfolio and really we went into insurance because of the theme around rising affluence, we see insurance as a sector where penetration was very low compared to the banking sector.  In Asia, in emerging markets we thought that there was a lot of tailwinds for growth, and then later we identified payments as a very interesting sector given the rise of e-commerce. We felt that digital payments, online payments were growing in importance and so our payments portfolio is now around about 3% of the overall financial services portfolio.

STEPHEN FORSHAW: Can I just make the point that looking backwards we have all of the data available online right back a number of years so we could point you to that after the media conference.

QUESTION: My question is about your cost of capital. Am I right in thinking that over the last couple of years that the cost of capital has come down to about 7%? It used to be about in the ballpark of 9% or so. So, therefore, my question is that I know that you calculate your cost of capital in a ground up kind of a fashion but given that you have been making more sort of unlisted company type of investments which are presumably more risky and therefore will be more rewarding, hopefully, so how can your cost of capital go down? 

Even doing it on a ground‑up basis, never mind the fact that even globally now, looking at it from a bottom‑down perspective, globally cost of capital is rising. So how ‑ when global money was at zero your cost of capital was at nine, now that global money is at 3% or thereabouts, your cost of capital has come down to 7?

ROHIT SIPAHIMALANI: Actually, if you look at the cost of capital, as you said, it's calculated bottom‑up through a Capital Asset Pricing Model, so the two key factors contributing to that: one is it risk‑free rate and then the market risk premium.  And the third aspect of it is really the data for the respective industries. Without getting too technical and I would that say if you looked at 9% numbers that you're talking about, was more in 2000s when actually the risk‑free rate was much higher than what it is today.

And the second thing we've done over the last decade, whereas earlier we were much more emerging market focused, I think, over the last 10 years, we've become a little more global which as we look at countries in the US and Europe, the market‑risk premium is lower than that what you would have in the emerging markets. The combination of these two factors is I think what has driven the blended number which was, as you said, you know, in the 2009 that it went to eight, and it's a rounded number between seven and eight right now.

QUESTION: Just looking at your net investments this year, am I right in thinking that's pretty much the strongest net investment, you know, over the last 10 years? And if so, how do I reconcile that with the sense I'm getting from you that it's a tougher environment out there, a lot of people are saying hard to find value?

ROHIT SIPAHIMALANI: So, it's an interesting point. I wouldn't look at each particular year and attribute to that because ultimately a lot of the stuff we do is bottom up, a lot of things we do are negotiated deals and an investment may fall into April in which case it's a new fiscal year or in March it's the previous fiscal year. If you look before the current one, we had one of the lowest net investments. If you look at the two years together, you will see that we've had a reasonable pace, actually a pace slower than the average of the last five years, but a reasonable pace. So, the one year picture sometimes distorts it just because of timing of specific investments. But your point is right, we do have a more cautious outlook right now compared to what we've had in the past.

QUESTION: My question is regarding the unlisted assets versus listed assets, how's the performance in the last financial year and if the performance of unlisted assets is better than the listed assets would you consider to invest more in this category?

ROHIT SIPAHIMALANI: Over longer periods of time, you're right, unlisted assets have given us higher returns than listed assets. If you take the last one year itself, because you had a very strong market performance of our listed assets, for the last one year itself our listed assets did better than our unlisted assets. 

Over longer periods, which is what we see as more relevant, unlisted assets have created more value than our listed assets. From our perspective, it's useful to have a balance, right?  Because the unlisted assets clearly have lower liquidity, for that we would expect to earn a higher return on them but at the same time our listed assets give us more flexibility in terms of monetising investments and redeploying in newer opportunities. So, we have a 60/40 mix between listed and unlisted which we think is something which is reasonable. Now if we do you find the right bottom-up opportunities we won't hesitate to deviate from that, that's not a target number as such. But we think it's useful to have a balance of listed and unlisted assets.

QUESTION: Hi. I just wanted to check with you, last time you are always saying that the competition for investments is much greater than you have seen in the past. We have seen a lot of private equity funds have a lot of dry powder and that is where you are steering a bit towards the private side because the public markets are expensive. One year later, the public markets have got more expensive. If you can give some colour on what you are seeing there in terms of just the competition and what you are doing to position your investments. Thanks.

ROHIT SIPAHIMALANI: So, I will make ‑ I will make two points on that. The first is that, you're right, that right now we find the public markets, I guess, as expensive or similarly as expensive to the previous year but more importantly, our outlook on public market investments has gone more cautious, just given what we've just talked about. So, our focus again, on balance is to look at more private market opportunities right now, where we see true value and we think fits with our themes, and so that's something that we are looking at and we talked about the six trends that we are broadly focused on and really our focus is on those opportunities.  

We're also looking at opportunities, this is the second point I wanted to make, where we feel we can add a lot of value to our portfolio companies.  But that's what's going to differentiate us and allow us to really see opportunities where we don't have to participate in an auction and can be better positioned with the competition. One key strength we have is our presence in Asia and as we look particularly at companies in US and Europe, around areas like technology, which are more global businesses, we feel that we could help them navigate as they look to Asia as a market and that does give us an edge, amongst other areas.

MICHAEL BUCHANAN: Maybe to chime in a little bit on your point on public markets, because we can look at the index level, of course, which is the easiest thing to do, but we need to bear in mind that earnings have been very strong, partly because of the resilience of the economy.  I mean I’m thinking here especially in the US, but it's true throughout the world.  But partly also because of the tax cuts and deregulation in the US. So if that earnings environment has improved quite significantly, then of course when we look at the overall index level we need to take that into account.  

What our expectation had been for some time is that we would get that earnings growth, but that with a higher Fed funds rate, higher sort of interest rate environment in general, the multiple, the forward PE [price-to-earnings ratio], would come down. So higher earnings, lower multiple and that's sort of been playing out. But what we're talking about now is that as we look further out, the risks of the trade tensions and the risk of a US recession are becoming more of a focus for us.

QUESTION: The second part of the question in terms of trying to compete, when you compete for these deals with the likes of private equity firms and all can you give some colour about how that’s changed? Has it made it tougher for you?  Do you need to pay more for these stakes?

CHIN YEE PNG: Maybe just to add on to what Rohit has said earlier on this topic, when we go out and market ourselves to potential investing companies, what they really like is our network in Asia and their ability to leverage our network in Asia. We talked about Adyen earlier on in the presentation and when we introduced them to our portfolio companies in Singapore, in Asia, it helps them to grow their business in Asia. And that's really what people are looking for. They're just not looking for investment dollars from you but they're looking for you to help them grow their businesses which I think that's really a differentiator that we have and that we bring to our investee companies.

ROHIT SIPAHIMALANI: We talk about company ecosystems, but I think what we try to build is our ecosystem. So when we add value in to some of these companies in terms of helping them, they go and talk to other companies and that that becomes a self‑fulfilling thing for us.  Very often with a number of these companies, we have repeat investments. It you take Alibaba, we've invested in multiple businesses of theirs. We were in Alibaba, Ant Financial, invested in Koubei, invested in Cainiao.  

So, as we do that, we build relationships, we build networks and hopefully that gives us an edge over some other players who might be out there.

QUESTION: Following on from the previous questions about Temasek's focus in the new investments, you guys mentioned you had six trends and technology is one of your focus areas.  Can I just check, are you guys looking to invest in more of ‑ more of these start‑ups with the sharing economy, in the tech sector but yet these companies have a disruptive impact on your other portfolio companies, for example, Singtel and other legacy companies, so how does that pan out?

CHIN YEE PNG: So, actually, when we look at investing early stage, one of the reasons why we look at early stage is to also understand what are the potential sources of disruption that could impact our own portfolio. So that's actually a very important learning for us and actually I would say that all of our portfolio companies are very cognisant of the risk that innovation and technology brings to their businesses and they're all taking very active steps to address those.  

So, for example, with DBS, as you know, they've undergone a huge digital transformation, both from sort of rejigging their IT architecture to be more flexible, but also really changing the mindset of the employees to be able to use data, machine learning in various functions.  So, for example, they use chatbots for automated software to answer calls in the call centre. They optimised the ATMs through using data and machine learning. So, there's actually been efforts by our portfolio companies to make sure they stay relevant and to make sure they stay at the forefront of innovation and digitisation. 

In a lot of instances we actually introduce some of these early stage investments that we have to our portfolio companies so that they can actually work together and deliver better services to their customers. So, I think across the portfolio that's something that all of our portfolio companies are very focused on.

QUESTION: One question about the venture, or early stage investment. Your Vertex ventures, can you tell us a little bit more about like how big the current asset is, how the investment return has been and if you have been injecting additional capital into the ventures? Thank you.

ROHIT SIPAHIMALANI: So, I think Vertex has done very well over the last few years and from being a firm that was focused on a couple of markets they're now a fairly global venture capital firm, with a presence in multiple markets from the US to Israel to China to India and South‑East Asia. 

They've been steadily growing their assets under management over the last decade and in recent years have also been increasingly accessing third party capital apart from just capital from Temasek.  And that's been possible partly because of the track record they've shown. So, I'm not sure they've actually disclosed their numbers but I can safely say that they're clearly amongst the top‑performing funds in the world in terms of the returns that they've delivered over the last decade or so.

QUESTION: There's been a clear focus on new economy disruptors, etc, in terms of the future investment horizon for Temasek, but I'm just curious where does that leave companies like logistics companies, infrastructure, and good old‑fashioned commodities and all those investment themes that are encapsulated in Belt and Road? Is that old hat, as you pursue the new economy? And I'm just curious to know how you are positioning for Belt and Road and whether that is a consideration for you at Temasek?

ROHIT SIPAHIMALANI: Well, our investment is alongside the themes we mentioned so we don't look at Belt and Road standalone as say as a theme for us to invest in. 

Having said that, areas that you mentioned such as logistics, I think, are an important part of the areas we're looking at. We have made investment in logistics in China, more recently, I think just a couple of months ago, we announced a joint venture with Ascendas to look at opportunities in India. So clearly logistics is an area we're looking at.  

Infrastructure, traditionally the traditional heavy infrastructure, which is more operation orientated, a lot of our portfolio companies have been the avenues through which we've done that. But again, if there's specific opportunities that come up that meet a sort of themes that we're looking at, areas we're focussed on, we'll look at those. 

QUESTION: Thanks. Just want to ‑ if you can share some thoughts about your domestic the lead investments in Ant Financials fund‑raising if you can just elaborate, you talked a bit about Go‑Jek, also about Any, if you can talk about how this plays into your portfolio and looking ahead how do you see competition for such deals from private equity firms when you look to invest in these companies? Thanks.

CHIN YEE PNG: Ant Financial as you know, is what we call new financial services. It's actually a technology company which links traditional financial services to new consumers so actually, Ant has got about 700 million retail customers in China, and 60 million [merchants] and when I say they have customers they have customers' data, which is much more important because they now have the ability to tell who amongst the customers have a willingness to pay and ability to pay. And they can help the traditional banks actually do credit underwriting.  These are customers which traditionally may not have access to financial services, so it's really bringing a bigger swathe of the population into the financial services net.  It’s really about sort of a final inclusion.  

So, they've been able to, through the Alipay system, build up a very strong customer franchise, from which they can then introduce financial services product, whether it's lending, savings, as well as insurance.  We think that actually they're working in partnership with the traditional players in that market in a very holistic manner to deliver financial services to underserved segments of the population. We think that's very exciting.  

Similarly, with Go‑Jek, it's a very similar story. Go‑Jek has built a digital ecosystem around ride-hailing, logistics including food delivery.  They have a 90% market share in food delivery, as well as in payments, right? And they are looking to solve pain points. If you've been to Jakarta, you know traffic's, not good, and having a two‑wheeler that can weave through traffic and deliver goods and services is actually quite powerful. 

Because they have multiple use cases, they actually are able to have the drivers have different activity occupy them through the day. So, for example, in the morning and the evening you have office commute. During lunchtime, during dinner you do food delivery. And during the day you do parcel delivery. So, actually, it leverages the driver far more than you would if you had a single scenario. So, actually, we find these to be quite innovative business models. We consider them technology but really technology is only an enabler to deliver goods and services in a more innovative fashion.

QUESTION: My question is more for clarification. When you mentioned that you expect your investments to slow over the next 9 to 18 months, what's the basis of that calculation of 9 to 18 months? And also, how does it map out with your other fiscal years?

ROHIT SIPAHIMALANI: So, I wouldn't take the 9 to 18 months too literally. I mean, I think it's more a view saying look, typically when we are thinking of our investments over the next year or two, given the outlook that we see right now, we would expect to slow our pace of investments. 

Obviously we've got to calibrate as we go along this period and make a call. So, for example, if we do see a recession earlier rather than later, and valuations and markets correct significantly, that in fact then may be a buying opportunity. We don't know when that's going to happen. 

So at this point, basically, we're just looking and saying, you know, for the near term of the next year or two as we see it, given the risks we just try to slow down our pace of investments so that we are better positioned to take advantage of opportunities when they arise then.

QUESTION: My question is very broad and very simple. In terms of investing globally, which region in the world fascinates you most at the moment?

MICHAEL BUCHANAN: The question is a little hard to answer definitively but let me have a stab and hopefully the others will rescue me when I fail! 

But look, I think when you look around all the different major regions of the world they've all got their issues, positive and negative. In the US, of course, you've got resilient growth but you've got this risk, rising risk of a recession as you look out further. Europe would be impacted by that but also has some homegrown issues including politics in Italy.  Brexit hasn't been mentioned yet but obviously that's something we're looking at as well. 

In China, there's some fantastic growth opportunities but, of course, very much front and centre in terms of the trade war.  Emerging markets there's a lot of room for growth there but if we are going into a US recession or a trade war, of course they would be impacted. 

So I don't think you can sort of say well, there's one of these places that looks fantastic from a country or regional perspective and it's rather to look within that and say what elements within those countries provide great opportunities but are not going to be quite so impacted by some of these other events.  

So you don't want to be investing in a company with lots of intra‑industry trade that will be impacted by a global trade war, or a failure of NAFTA or Brexit or whatever it might be. But you might be more interested in some specific consumer technology or, you know, biopharma or something like that, as we've laid out earlier in the presentation. So I think it's not so much one country or one region, but rather some specific investable themes which we've outlined earlier.

QUESTION: Can I ask of China stocks, they've really decreased over the last months. What, in your opinion, is that a reflection of? Looming trade wars or of domestic China problems?  And secondly, the question regarding your China Bank holdings, do you intend to stick to them? Are there plans to decrease the level?

CHIN YEE PNG: We have large positions in Chinese banks and we're comfortable with the position. We expect that to continue. I think the recent decline in stock prices really reflects some fears around the trade tension that's been escalating and also probably forward‑looking, people are expecting the economy to slow down a little bit as well. 

The regulators are tightening, albeit quite calibrated, and they've released valves through the Triple-R cuts [Reserve Requirement Ratio], etc, to manage liquidity in the system but we do expect a slight slowdown in the second half of the year, which could explain some of the movements in stock prices.

MICHAEL BUCHANAN: Just to chime in on that. In general, in terms of what we expect on China, we think that the focus on deleveraging and on structural reforms are absolutely the right ones and so they've started that journey. Of course, there's more to come. But that's absolutely the right focus and that they still do have some policy room to offset the impact of the kind of trade tensions that we've seen so far. So, we expect a gradual slowdown in growth but that China still has the policy tools at its disposal and still has the focus on right sort of structural reforms.

ROHIT SIPAHIMALANI: I’d also make the point that you see we're all influenced by the decline we've seen in the A-share market. That obviously is influenced a lot by sentiment, because it's mostly a retail market. If you look at MSCI China, which is the more universal Chinese companies, that's down, just marginally down from the beginning of the year, no different from most other markets and in fact probably better than a lot of other markets. So I think our views tend to get coloured a lot by what's recently happened in the A-share market, which, as I said, is a lot more retail driven and sentiment driven.

QUESTION: I'd just like to circle back to China, actually. It's been three months since the MOU you signed with HNA. I would like to ask about the progress about these talks which given the death of the co-chairman, have the talks been impacted and will we see more investments?

CHIN YEE PNG: Obviously we were quite shocked and saddened to hear about Chairman Wang Jian's passing but we don't see any impact on our current arrangements with the [HNA] group. We've invested in companies which are well managed, have got a deep bench and we expect that to continue. So, for example, Gategroup is the world's largest airline catering business. It's a Swiss company, it's got operations globally and we're very comfortable with those positions.

QUESTION: Back to China, just a follow up, when you talk about US I think you said you're going to pace the investment. Is that same to China as well or ‑ and would you consider maybe divesting some of the existing holdings at this point of time?

CHIN YEE PNG: When we talk about pacing our investment we're referring to the entire portfolio, not just to the US markets.

QUESTION: So, including China?

CHIN YEE PNG: In all markets.

QUESTION: I just wondered as Singapore's share of the portfolio goes down, is Temasek comfortable with it continuing sliding or is there any ideological preference to make Singapore the biggest?

ROHIT SIPAHIMALANI: Well, to be fair, Singapore is still growing in absolute size. The size of our portfolio in Singapore has increased between last year and this year. It's just the share in the overall portfolio has gone down, partly because of incremental opportunities that we've seen in other parts of the world. 

And in some sense that's natural.  Fifteen years back we were investing primarily in Singapore. Now that we have a global footprint and the themes that we've talked about that we think can give us sustainable returns over long term, a lot of those themes are global and so therefore we will find opportunities in the US, Europe, China, and elsewhere. 

We will continue to invest in Singapore when we find the right opportunities but I think it's incrementally.  It's only, I guess, to be expected that we will find more opportunities outside Singapore than inside Singapore. But I just want to re‑emphasise the fact that Singapore actually is growing in absolute terms in terms of the portfolio.

CHIN YEE PNG: And just to add, we don't really have specific targets for our geographical mix, it really is the outcome of the investment activities that we undertake and the opportunities that we see.

SULIAN TAY: It might be worth pointing out too, that the 27% that we report for Singapore that's on a look‑through basis, of the assets.  So, the Singapore‑based companies, as they grow and they grow globally, the percentage is going to show up in the other markets, not in the Singapore piece, and we obviously are very happy that they continue to grow and grow their businesses globally outside Singapore as well.

QUESTION: My question, actually, is on the telcos, your exposure to the telco sector in Singapore. I mean, as we can see it's been down quite significantly this year with the investments in Singtel, M1 and StarHub. So with the increased competition we expect by the end of the year do you think this is sustainable and do you see any solution for tech sector in Singapore?  Thank you. 

ROHIT SIPAHIMALANI: On the telcos, look, our largest exposure, as you said, is Singtel and you rightly mentioned that last year, the stock price has come down. But again, I keep making the point that, you know, we can't look at things just from a one‑year perspective. You know, Singtel's been a steady dividend and if you take longer periods.  If you take the last 15 years, returns from Singtel have been in the double digits. Now, clearly there is competition that is coming in a fourth operator and Singtel's dealt with competition in the past. Clearly telecom companies around the world are facing certain challenges with the change that we are seeing in the digital economy and Singtel and other companies are, you know, preparing to adjust to that. So, I would say it's something that clearly they're going through a phase that they need to manage and be ready to address, and they have done that in the past and feel confident that the board and management is very focussed on doing the same right now.

QUESTION: My question is on the fresh property cooling measures that were announced by the Singapore Government last week. Some analysts say they could have a spillover effect onto banks. I would like to find out what you think and given DBS is a main investment in your portfolio, do you see any impact?

CHIN YEE PNG: I think, you know, DBS has built multiple engines for growth in the last few years, both in Singapore and in the region. I think the mortgage market is only one of many different markets they're in so we don't expect it to have a significant long‑term impact on the DBS performance.

MICHAEL BUCHANAN: I was just going to chime in briefly on the Singapore point as well, just to sort of say look, you know, Singapore, of course, the overall economy has been doing very well against the backdrop of relatively strong global growth and that's still the case where we sit today. 

The property cooling measures are, we think, unlikely to have a broad macro impact. Of course, they will have a sector impact. But, of course, as you look further out for Singapore, it is going to be exposed to the sort of risks we've been talking about today in terms of the trade tensions and the risk of a US recession but it's got a strong, resilient economy with a great labour force, fantastic connectivity and so that resilience, we think, would come back regardless.

QUESTION: Because of the Go‑Jek video just now, I'm just wondering on the South‑East Asia market, other than Go‑Jek what investments have there been in the South‑East Asia market and what potential do you think this will bring to the portfolio in the future?

ROHIT SIPAHIMALANI: I will make one point about South‑East Asia. One of the areas, and others can chime in on other areas, but one of the areas that we're excited about is the growth of digital economy in South‑East Asia. You know, we did a report along with Google, which talked about the fact that we saw the South‑East Asia Internet economy being US$200 billion by 2025, up from US$50 billion last year, and I must say that the opportunities that we've seen or the progress we've seen since we did that report have surpassed all of our expectations.  

One interesting statistic is that mobile Internet usage in markets like Indonesia is almost 3.9 hours a day, which is almost double that of the US.  And that level of user engagement we think is going to drive a lot of new business models. Now, the fact is that a lot of these business models are still early so we haven't invested in so many opportunities, but if you look at our platforms like Vertex, they've invested in over half a dozen such opportunities just in the last nine months and have been doing so. 

So, we are tracking a lot of these companies and we think that over the next couple of years, as they become bigger, they will provide more opportunities for us to invest in. So, that is one opportunity area that we definitely focused on and then we are looking at a further couple of other areas too.

ALPIN MEHTA: Just to add to that I think there's a lot of structural reform potential in countries like Philippines and Indonesia, etc, and I think that could offer present interesting opportunities for us as an investor as well. We've been quite open and if we find an attractive investment that meets our intrinsic values test I think we're quite happy to look at some of those.

QUESTION: if I can bring it back to the region and more locally for the second part of my question, can you give us a sense of what the extent of your exposure is to 1MDB, whether it's bonds or otherwise?

ALPIN MEHTA: On your question on 1MDB, just to clarify we have no investments in 1MDB. That's where we stand.

QUESTION: Regarding the PE bond issued by Azalea, we understand that it's a seven times oversubscribed. Will you consider to issue ‑ to launch another issue or will you consider to launch Temasek retail bond? Thank you.

CHIN YEE PNG: Maybe on the Azalea bonds, as you know, it was very well received and we're very happy that it was well received, because I think it gives retail investors a new asset class.  The bonds are really backed by a seasoned portfolio of PE funds and we hope that there will be more of those to come.

ROHIT SIPAHIMALANI: But I would say that the retail bond that you mentioned, that has been often talked about, that is a very different thing.  You know, this Azalea [Astrea IV Bonds] was a securitised portfolio of private equity assets, rated single-A and with recourse to those assets. A Temasek bond would be a function of our own general financing needs and we would decide as and when to do that, but that would be a AAA rated [issuer] piece of paper, reliant on Temasek credit. It two, I think, are different and decision-making for both of them will be very different. 

QUESTION: Regarding a particular investment, Sheares Healthcare, a subsidiary of Temasek, invested US$50 million in Asia Healthcare Holding last week. Can you elaborate a bit on that and how the business model of Sheares Healthcare is different to that of Temasek?

ROHIT SIPAHIMALANI: Sheares is a healthcare services platform that we set up a couple of years ago here in Asia. We saw a significant opportunity in the healthcare services in the region and at one level, as Temasek, we do invest in existing management and companies and look to benefit from that. 

But here we saw an opportunity where we thought we could create a platform, set up their own management team and the board and have this platform directly look for opportunities, greenfield and brownfield, to build up healthcare services in the region. 

So Sheares is a result of that effort and the investment we made in India, you know, last week, was one of those efforts by this platform. 

Again, a few years back we told you about the Enterprise Development Group that we'd set up, again to incubate new businesses in areas that we think are attractive. Sheares, again, is part of that effort.