Despite global jitters, Temasek is still very upbeat on Chinese stocks

It makes up 27% of its portfolio.

In spite of the uncertainty surrounding Chinese stocks, Singapore’s Temasek remains very upbeat on its Chinese portfolio.

China made up 27% of the investment company’s portfolio as of March 2015, and Temasek’s record-breaking gains in the previous financial year were mainly driven by the Chinese equity rally.

“China is pursuing a more sustainable growth path, and has the means and tools to address credit stresses in its financial system. This macroeconomic backdrop, combined with easy monetary policy by most central banks, caused a rally in major equity markets, with China a clear outperformer. As a result, valuations, especially in more mature markets, are well above historical averages,” Temasek said in its annual report.

Temasek said that should China’s credit situation deteriorate, its expected return would be reduced by almost 2%. However, as credit risks remain “manageable”, Temasek noted that it has been steadily increasing its exposure to China.

“From our earlier investments in banks as broad proxies of a transforming economy, we have broadened our exposure to include sectors like insurance, consumer, and technology, which are likely to benefit from the transformation of China,” Temasek said.