Healthcare and technology firms have become investor favourites lately but GIC also sees opportunities in other sectors - only at the right price, however.

Asset valuation has become ever more critical, given the way prices are moving amid the pandemic, chief executive Lim Chow Kiat said yesterday.

At a briefing ahead of the release of the sovereign wealth fund's annual report, he said: "Investing is not just about knowing what sector will do well or what company do well, that is of course very important, but it's also important to be disciplined about the price you pay for that."

Valuations of companies in sectors like healthcare and technology have gone up substantially, he added.

While GIC has investments that have benefited from this trend, Mr Lim said the fund is careful about how it deploys more capital in these areas.

He noted that there are other sectors which present good opportunities, with "companies which are able to respond to change and have a sufficient balance sheet to do so", such as the consumer, infrastructure and energy industries.

Group chief investment officer Jeffrey Jaensubhakij told the briefing that GIC is monitoring sectors where valuations have yet to adjust although it was able to invest in some consumer-oriented companies earlier this year when prices fell.

"I think we have to be a bit more careful in trying to figure out what are truly long-term adjustments that these companies can never come back or won't come back from quite as well, versus ones where... you can actually see a nice comeback (in two to three years)."

Besides healthcare and technology, there are other sectors that are also "advantaged" by the changes that Covid-19 has brought on, Dr Jaensubhakij said, noting that GIC has made major investment moves in two real estate segments - data centres and logistics.

In April, it entered a joint venture worth more than US$1 billion (S$1.38 billion) with Equinix to build three data centres in Japan for the cloud computing market.

And it signed a deal last December to buy a portfolio of logistics properties in Europe for about €950 million (S$1.5 billion).

GIC noted in an article alongside its annual report that industry consolidation is likely to increase, given the way the Covid-19 crisis has drastically weakened the finances of many companies, particularly small-to medium-sized ones.

Many firms will be forced to file for bankruptcy, secure additional funding or to seek mergers or other strategic alternatives, it said.

GIC also noted that private equity cash reserves reached record highs this year, providing further support for industry consolidation.

But it pointed as well to challenges ahead for globalisation and Asia amid the pandemic, with companies likely to look to diversify their production geographically or bring it closer to home.

GIC cited a survey which found that close to 60 per cent of firms were planning to move manufacturing processes out of China in the near future compared with 36 per cent in December 2018.

While some of this will bring production back to home markets, many companies are turning to other Asian economies like Taiwan, India and South-east Asia as alternatives.

But it will take a long time for firms to move out of China, given its advantages such as supply chains and its factory network, Dr Jaensubhakij noted, adding that only Taiwan and South Korea have similar capacity in terms of technology capability.

Indonesia and Vietnam are two countries GIC has its eye on in terms of lower-cost manufacturing that could move out of China, he said.

"We are certainly looking at both domestic industries, as well as infrastructure and supporting industries in those two countries."