UPDATE 3-Temasek eyes food, energy after portfolio slump

* Portfolio fell over a fifth in year to March 2009

* Temasek sees opportunities in Latin America, food, energy

* Temasek looking for internal, external CEO candidates

* CEO says staff bonuses to be cut again this year

(Adds plans for outside investors, quote)

By Saeed Azhar and Kevin Lim

SINGAPORE, July 29 (Reuters) - Singapore state investor
Temasek said its portfolio slid by at least $27 billion, or more
than a fifth, in the year to March, but it will stick with banks
and sees opportunities in food and energy.

The fund saw potential in Asia and Latin America and was
comfortable with financial services as its core portfolio
holding, despite being hurt by losses on high-profile
investments in Western banks after the market meltdown last
year, CEO Ho Ching said on Wednesday.

"At this point, we are still comfortable with the financial
sector as a core sector that reflects the key economies we are
interested in," Ho said at a seminar.

She acknowledged, however, that the increased regulation of
the financial sector may result in the rate of returns falling.

"In terms of sectors specifically, we are agnostic, we don't
have a sectoral target," she said, adding the fund would look at
food and energy, but did not give further details.

Sovereign wealth funds from Asia and the Middle East drew
attention and some criticism after investing billions in Western
banks at the start of the credit crisis. Despite big losses
since, the funds are still seen as a potential source of
capital.

Temasek [TEM.UL] suffered an estimated loss of over $4
billion when it sold its stakes in Bank of America (BAC.N) and
Barclays (BARC.L) earlier this year.

With 40 percent of its holdings in financials, Temasek's
portfolio lost nearly a third in the eight months to November,
sparking unprecedented criticism in Singapore about its
strategy.

Ho did not give the exact portfolio level as of March 2009.

"In our Temasek Review last year, we reported an annual
value-at-risk of almost S$40 billion ($27.8 billion) last March.
This meant a 16 percent probability for our portfolio value to
drop more than S$40 billion by March this year. Indeed, it has
turned out to be so, and more," Ho said in a rare speech.

Temasek, whose sole shareholder is the Ministry of Finance,
had S$185 billion in assets as of end-March 2008, which fell to
S$127 billion as of November 2008. For a factbox on Temasek and
its investments see [ID:nSIN129364].

BACKING ASIA-FOCUSED BANKS

Despite the portfolio fall, Temasek has backed the rights
issues of Asia-focused Standard Chartered (STAN.L) and
Singapore's DBS Group (DBSM.SI), and boosted its stake in China
Construction Bank (601939.SS)(0939.HK).

"Banks are one of the best proxies that can benefit from the
growth of the economy," said Wong Kok Hoi, who helps manage $1.5
billion in assets as chief investment officer of APS Asset
Management.

Temasek's Ho also proposed that Temasek may allow outside
investors such as institutions and eventually retail investors
to invest in joint projects.

"If we are looking at a co-investment platform, we are
principally looking for people including retail investors who
are prepared to invest long-term," she said.

GOODYEAR

Ho's remarks on Temasek's investment losses and strategy
were her first public comments since Temasek said last week
Charles "Chip" Goodyear will not become CEO due to differences
over strategy. [ID:SIN435934]

Ho, who is also the wife of Prime Minister Lee Hsien Loong,
did not elaborate on the differences between Goodyear and
Temasek.

"I just want to reaffirm that the decision was both mutual
and amicable. We continue to hold Chip in very high regard for
his professionalism and his integrity," she said.

Goodyear, who would have been Temasek's first foreign CEO,
was widely expected to trim Temasek's financial holdings and
move aggressively into commodities and energy, analysts said.
[ID:nSIN190820].

Ho said Temasek would continue to look at internal and
external candidates for her replacement.

She also said the fund's performance would hurt staff
bonuses, leading to a second year of cuts to the bonus pool, but
vowed to seek long-term returns for Singapore.

"We are not in this to look pretty. We are in this to
deliver value, we are in this to deliver and build a team, build
an institution for the long term and we maintain focus on that."
($1=1.439 Singapore Dollar)