* Says China accounts for 20 pct of portfolio
* Temasek's portfolio up 3.8% to $157 bln vs 15 pct rise in MSCI index (Adds details from briefing, fund manager quote)
SINGAPORE, July 7 (Reuters) - Singapore state investor Temasek Holdings said on Thursday it remains bullish on China, even though it sold $3.6 billion worth of shares in two Chinese banks just a day earlier.
"We have faith in the policies of the Chinese government in the long term and we are bullish on China in the long term," Nagi Hamiyeh, managing director for investments, told reporters at a briefing on Temasek's performance for the financial year ended March 2011.
The state investor also said that about 20 percent of its S$193 billion ($157 billion) portfolio is invested in China.
Temasek's decision to reduce its stakes in Bank of China and China Construction Bank (CCB) came just a day after ratings agency Moody's warned of a possible downgrade of Chinese lenders due to their higher-than-expected exposure to local government debt.
Wong Kok Hoi, chief investment officer at APS Asset Management, said Temasek's decision to reduce its stakes was probably due to asset rebalancing, given the firm's still large exposure to Chinese financials.
"The interest spread is huge in China. It's mandated. The banks can take a hit from non-performing loans... (but) as long as the Chinese economy is growing strongly at 7-8 percent, the banks will continue to do well," Wong said.
Temasek said its portfolio rose 3.8 percent year-on-year to S$193 billion at the end of March, lagging the around 15 percent rise in the MSCI Asia ex-Japan index over the same period.
It said 77 percent of its portfolio was in Asia as of end-March, fractionally down from 78 percent a year earlier.
Asked about newspaper reports that chief executive Ho Ching, the wife of Prime Minister Lee Hsien Loong, was stepping down, a senior Temasek official said she had "unequivocally" told staff that she was staying.
"She remains our CEO, she is fully engaged with us," Dilhan Pillay Sandrasegara, the head of portfolio management, told the briefing. ($1 = 1.228 Singapore Dollars) (Reporting by Saeed Azhar, Kevin Lim and Charmian Kok; Editing by Muralikumar Anantharaman)