Temasek Holdings, Singapore’s state investment firm, plans to buy more Asian assets after bets on the region drove a record gain in the value of its holdings.

Temasek’s assets climbed 43% to $186 billion in the year to March 31, surpassing the previous peak of $185 billion reached two years earlier, the firm said in its annual report today. That offset last year’s $55 billion plunge, when it posted losses on bank stakes during the financial crisis.

 

Asian investments outside Singapore and Japan expanded to almost half of Temasek’s portfolio and the value of its energy and resources investments rose 72% as it tapped the appetite for raw materials in China and India. Temasek will benefit as Asia’s growing consumption cushions the effects of the sovereign-debt crisis in Europe, said Joseph Tan, Singapore- based chief economist for Asia at Credit Suisse Group AG.

 

“They have shifted their strategy to look more into emerging markets, more into Asia, and Asia is looking to be one of the bright spots in the world today,” Tan said before the report. “Growth is still relatively robust in this part of the world.”

 

The International Monetary Fund forecast China and India will post the world’s quickest growth rates this year of 10.5% and 9.4% respectively. The euro area will grow at 1% in 2010 and the U.S. by 3.3%, it said.

 

While the MSCI World Index rose 49% in the 12 months to March 31, it has since plunged 10% on concern the economic recoveries in Europe and the U.S. are petering out.

 

“Choppy waters lie ahead, but Asia will maintain its secular long-term growth,” Temasek Chairman S. Dhanabalan said in the annual report. “Our focus on Asia continues.”

 

Over the next decade, Temasek is likely to raise its investments in Asia and steadily increase them in regions such as Latin America, Chief Investment Officer Tow Heng Tan said.

 

Asian investments outside of Singapore and Japan made up 46% of the portfolio as at March 31, up from 43% the year before. Investments in Singapore rose to 32% of assets, from 31%, while holdings in more developed countries that are members of the Organization for Economic Cooperation and Development shrank to 20% from 22%.

 

Temasek’s made $10 billion in investments, including spending more than $3 billion in the financial year buying additional shares of companies such as Jakarta-based PT Bank Danamon Indonesia and Singapore’s Neptune Orient Lines Temasek’s participation in rights offerings by companies in its portfolio bolstered its assets as the shares advanced.

 

Temasek also injected $1.5 billion into Singapore Power in October to support its growth plan, and added investments in South Korea and India.

 

Temasek has had an annual return of 17% since its inception in 1974, according to the report, up from 16% annualized since it reported in September.

 

Net income fell 26% to $4.6 billion from $6.2 billion a year earlier because of lower profit contributions from some portfolio companies that were hurt by the financial crisis, Chief Financial Officer Leong Wai Leng told reporters. Temasek, founded to help develop the island’s banks, airlines and ports, generates assets from the income of the companies it owns, and not government budget surpluses or oil revenue.

 

The company’s divestments in the year to March 31, including the sale of its 62% stake in Chartered Semiconductor Manufacturing, fell to $6 billion from $16 billion in the previous 12 months.

 

Temasek, which aborted the appointment of Charles “Chip” Goodyear last year to replace Chief Executive Officer Ho Ching, 57, has named former Singapore Exchange Chief Executive Officer Hsieh Fu Hua an executive director and president in charge of succession planning.

 

Last July, the company reversed its appointment of 52-year- old Goodyear, the former head of BHP Billiton, citing “differences regarding certain strategic issues.” BHP Billiton is the world’s largest mining company. Ho, the wife of Singapore Prime Minister Lee Hsien Loong, remains in charge.

 

“There is no active search for a new CEO,” Executive Director Simon Israel told reporters.

 

Investments in financial firms rose to 37% of its portfolio from 33% after it increased its stake in China Construction Bank Corp. and the value of such investments swelled as markets recovered. Temasek has agreed to buy US$200 million ($276 million) of shares in the Hong Kong part of Agricultural Bank of China Ltd.’s upcoming initial public offering.

 

Temasek sold its stakes in Charlotte, North Carolina-based Bank of America Corp. and London-based Barclays Plc at losses in the previous year.

 

The value of Temasek’s investments in resources firms rose to $11.2 billion, or 6% of its total portfolio, from $6.5 billion, or 5%. It invested in Calgary-based oil and natural-gas explorer Niko Resources and Singapore-based agricultural commodities supplier Olam International.

 

Temasek also added assets in Latin America, investing in Amyris Biotechnologies Inc., the U.S. parent of a Brazilian biofuels producer, and Santiago-based LAN Airlines SA, Latin America’s biggest carrier by market value.

 

In August, Temasek said it set up a wholly owned global investment company, Seatown Holdings Pte, with committed capital of $4 billion. Seatown, which makes its investment decisions independently, will co-invest with “sophisticated investors” within the next three to five years, Israel told reporters in connection with the report.

 

Temasek also set up SingBridge International in June last year to invest and develop cities in Asia, such as the Tianjin Eco-City in China.

 

The investment firm is finding alternative ways to boost returns as China attempts to contain asset-price bubbles, Europe battles a sovereign debt crisis and governments there embark on austerity programs to trim budget deficits.

 

These measures could “pose headwinds to global economic growth in the near term,” CIO Tow told reporters. Temasek, which ended the year with a net cash position, wants to “maintain liquidity, continue to invest and divest steadily over the cycles,” he said.