SINGAPORE — Temasek Holdings’ portfolio value rose at a slower pace in its last financial year, as its assets in key Asian markets such as Singapore and China took a hit from stock market volatilities during that period.

But the state investor remains confident in Asia’s long-term prospects and will continue to invest in the region’s growth sectors, including in China’s financial institutions, despite concerns of a banking crisis and economic slowdown, its key figures said at a full-year review briefing yesterday.

Temasek’s net portfolio value rose 3.7 per cent to a record S$223 billion in the financial year ended March, less than half the 8.6 per cent gain seen in the previous year. Group net profit held steady at S$11 billion.

The lacklustre growth came as the Hang Seng China Enterprise Index and the benchmark Straits Times Index — where about half of Temasek’s assets are listed — lost about 7.3 per cent and 3.2 per cent during the period.

“We, however, saw the weakness in the markets as an opportunity to significantly step up our investments. Last year was the most active year for us in terms of new investments since the global financial crisis,” said Mr Rohit Sipahimalani, co-head of Temasek’s investment group.

Temasek poured S$24 billion into new investments last year, the most since 2007, increasing its holdings in AIA and the Industrial and Commercial Bank of China, among others.

The vote of confidence on China’s banking sector is justified even though fears over shadow banking and slower economic growth in the country led to short-term fluctuations in asset value, said Mr Wu Yibing, Temasek’s head for China. “The financial institutions will have ample capability to handle the current storm and adjust to the risks,” he said. “We remain comfortable with our stakes and will continue to invest in financial institutions because they are good proxies for long-term growth.”

Temasek’s strategy works for them because of their fundamental holding power, Barclay senior economist Leong Wai Ho said. “Temasek is not part of the short-term investment community — it has the deep pocket and holding power to see long-term opportunities realise,” he said.

Banking is only part of Temasek’s focus in Asia, where the investor is also bullish on the consumer market. In April, Temasek paid US$5.7 billion (S$7.1 billion) for a 24.95 per cent stake in A.S. Watson, whose portfolio includes health and beauty store Watsons and Hong Kong supermarket chain ParknShop.

“We remain anchored in Asia (and) ended the year with 72 per cent of portfolio exposure to Asia. This is because we continue to see long-term growth in Asia and the softer markets gave us the opportunity to add on our positions, especially in China,” Mr Wu said.

Temasek’s assets in China and Singapore — where it is a major investor in key institutions such as DBS, SingTel and Singapore Airlines — makes up about 56 per cent of its portfolio.

Further afield, the company has also grown its exposure in North America and Europe. “(The two regions) are showing signs of economic improvement … Europe has good companies with solid fundamentals and global reach, while North America remains the centre stage for innovation,” Mr Wu noted. “This will lead to opportunities in energy, resources, life sciences and technologies.”

Among the investments are US$1 billion in biotechnology firm Gilead Sciences and US$500 million in lab equipment provider Thermo Fisher Scientific. Another £235 million (S$500 million) was invested in British oil and gas company BG Group, while S$2 billion was poured into Temasek-owned liquefied natural gas company Pavilion Energy.

“We have invested in opportunities that are driven by urbanisation and increasing life expectancies. Rapid advances in technology have transformed the global marketplace,” Temasek president Lee Theng Kiat said. “As an owner-investor for the long term, we are ready to support new ideas to address emerging needs and opportunities, such as healthcare for an ageing population, personalised medicine or e-commerce.”

At the same time, divestments amounted to S$10 billion as Temasek exited investments in Chinese Internet firm Youku Tudou, Tiger Airways and Cheniere Energy, and reduced holdings in Bharti Telecom and Seoul Semiconductor.

Temasek’s one-year total shareholder return was 1.5 per cent in Singapore dollar terms.