Tamasek continues to look for opportunities in China (2)

It also established several investment platforms, including Pavilion Energy which has an initial authorized capital of 1 billion Singapore dollars and aims to capitalize on the growing demand for clean energy, particularly the liquefied natural gas, as the regional economy continues to transform and urbanize.

Financial services accounted for 31 percent of its portfolio based on underlying assets, remaining the largest exposure by sector, followed by telecommunications, media and technology at 24 percent and transportation and industrials at 20 percent.

Life sciences, consumer and real estate accounted for 12 percent of its portfolio, and energy and resources 6 percent.

Its underlying portfolio exposure to Asia was 71 percent, including 30 percent for Singapore. It exposure in North America and Europe rose to 12 percent from 11 percent. Latin America exposure rose to 2 percent from 1 percent.

CHINESE BANKS

Its underlying exposure to China was 23 percent, down from 24 percent a year earlier, though it continue to rise in terms of the value of the assets.

Chia said the sovereign wealth fund expects the United States economy to continue growing, albeit at a slowed pace. The contagion risks in the Eurozone is perceived to be less than it once was, but the growth will continue to be weak.

"On China, the growth is slowing and there are some risks in the financial system. However, the government has ample policy room to deal with these challenges," he said.

There will be short-term challenges as China pushes forward its reforms, but there will be overall benefits over the longer term, Chia said.

Temasek will be looking for opportunities that may come from China's solution to the challenges it is facing.

"China itself is a very large economy, we have ... started investing outside the banking industry, including insurance. We have also invested in technology companies. We have invested in real estate companies. We have invested in companies that are in the consumer sector," Chia said.

He said Temasek invested in the banks as a proxy to the underlying economy and was not concerned about the liquidity in the banks.

"The banks we invested in are very well capitalized. The loan- to-deposit ratio for those banks that we invested in still has a lot of room as far as creating a buffer for cushioning any negative situation," he said.

Temasek's stake in China Construction Bank, one of the largest lenders in China, accounted for 8 percent of its total portfolio value. Its stake in Singapore Telecommunications accounted for 14 percent, and Standard Chartered 7 percent.