Singapore's sovereign wealth fund Temasek is sticking with its bets on China, looking past recent volatility to gradually increase its exposure.
"We remain confident in the long term prospects of the Chinese economy," Wu Yibing, head of China investments at the 266 billion Singapore dollar ($196.09 billion) fund, said at the press conference announcing the fiscal year results. "The Chinese government is determined to foster the Chinese capital market into one of the most important capital markets in the world and we believe in that, as well that the Chinese economy would become one of the most important economies in the world."
Around 27 percent of Temasek's portfolio is concentrated in China, up from 25 percent last year, although that's still below the 28 percent still in Singapore this year. While the fund pared its stake in China Construction Bank, selling around a 1 percent stake, the bank remains one of Temasek's largest holdings, accounting for around 6 percent of the total portfolio.
Temasek is undaunted by either concerns over the mainland's slowing growth or its recent stock market volatility, which saw shares there drop over 25 percent during the past month.
"We are actively building our position in the Chinese capital market," Wu said. "The short term correction, we believe, is volatility in the long term growth of the capital market and we actually view the volatility may present good opportunity for us to invest as well."
From its initial investments in Chinese banks, Temasek has broadened its investments on the mainland to include technology, media and telecommunications (TMT) companies, such as a stake in Alibaba, as well as plays on insurance, life science and agriculture sectors.
As a whole, Temasek's returns for the fiscal year ended March 31 bounced back dramatically, with the fund reporting a 19 percent total shareholder return, up from just 1.5 percent the previous year as its emerging market holdings took a hit from the "taper tantrum" market rout after the U.S. Federal Reserve first broached the idea that it would taper its asset purchases.
"This was our most active year since the global financial crisis," said chairman Lin Boon Heng, adding that the firm made 30 billion Singapore dollars ($22 billion) in new investments, and a record S$19 billion ($14 billion) of divestments.
The fund, headed by Ho Ching, the wife of Singapore's Prime Minister Lee Hsien Loong, said the opening of offices in London and New York helped it capitalize on investment opportunities in both regions.
Ho Ching began a three-month sabbatical leave in April, shortly after the death of her father-in-law, Singapore's founding father Lee Kuan Yew. At the press conference, Temasek indicated she is likely to return as planned, noting that she is regularly in contact with her colleagues.
--Nyshka Chandran contributed to this article.