UPDATE 1-Malaysian investment arm portfolio rises to record $40 bln

Thu Jan 17, 2013 6:55am EST

By Yantoultra Ngui and Al-Zaquan Amer Hamzah

KUALA LUMPUR Jan 17 (Reuters) - Malaysia's state investment arm saw its total portfolio value swell 12 percent to 121.6 billion Malaysian ringgit ($40.3 billion) at the end of last year, a top executive said.

Azman Mokhtar, managing director of Kuala Lumpur-based Khazanah Nasional Bhd, said the increase reflected the success of the firm's investment strategy.

"We believe the portfolio is balanced and well-positioned to benefit from exposure into the Asia-Pacific growth region as well as several dynamic sectors that we expect to continue outperforming," Azman told reporters at an annual review on Thursday.

Khazanah has been scaling back its holdings in the southeast Asian country's top companies as part of government attempts to boost liquidity in the local equity market and lighten the state's hand in the economy.

It has also been pursuing selected investments.

Khazanah, owned by the Finance Ministry, and Canada's Sun Life Financial Inc, have agreed to buy 98 percent of Aviva Plc's Malaysian insurance joint venture with lender CIMB Group Holdings Bhd for 1.8 billion ringgit.

"The motivation for us is to work with a very well-known, reputable leading global player like Sun Life. We are able to enter a good sector, it is a good play on rising incomes," said Azman.

Khazanah and Sun Life will each pay 900 million ringgit for a stake in CIMB Aviva Assurance Bhd, a Malaysian life insurance company, and CIMB Aviva Takaful Bhd.

Khazanah owns stakes in some of the country's largest listed firms, ranging from Axiata Group Bhd, Asia's third-largest mobile services group outside Japan and China by subscribers, to Malaysia's biggest property company by market value UEM Land Bhd.