* Fund had NOK 24.3 bln in Russian bonds at end 2013
* Fund's Russian stocks are worth NOK 22 bln
* Fund will seek to invest more in China -CEO
* Returns 1.7 pct in Q1 (Recasts, adds quotes from CEO)
By Gwladys Fouche
OSLO, April 30 (Reuters) - Norway's $860 billion sovereign wealth fund is holding off from making new investments in Russia because of the conflict in Ukraine, its chief executive said on Wednesday.
The fund usually looks to buy equities and bonds when markets are falling and sell when they rally, but it views the political turmoil over Ukraine a risk too far at the moment.
"In most other situations where there is market stress, we try to be a countercyclical investor," Yngve Slyngstad told Reuters. "Countercyclical does not really work well when the risk factors are of a geopolitical nature."
Slyngstad, who said on Friday that the situation in Ukraine had altered the risks affecting the fund's investments in Russia, added that the fund's starting point when there are geopolitical factors is to monitor the situation carefully rather than react immediately.
The fund held about 22 billion crowns ($3.67 billion) in stocks in Russian companies and 24.3 billion crowns in Russian government bonds at the end of last year.
Since then, the fund's Russian equity holdings have been "slightly lower, but in the bigger scheme of things, more or less unchanged during the first quarter", Slyngstad told a news conference.
Its Russian bonds holdings over the same period have returned a loss of 9.7 percent.
The fund, which invests Norway's vast surplus of oil money, will seek to increase its investments in China, Slyngstad said, as it continues a shift away from European assets towards Asia and emerging markets in search of higher returns.
But its possibilities remain limited in the world's second-largest economy because of Chinese quotas on foreign investors. The fund's Chinese investment quota was increased last year by 50 percent to $1.5 billion.
"We will wait a few months, a few quarters, and we will reapply for a larger quota. We have not yet decided how much," said Slyngstad, who has previously urged Beijing to be more open to foreign investors.
In the first quarter the fund made sharp cuts to its government bond holdings in the United States and Germany while increasing its stake in Mexican and Brazilian debt, it said on Wednesday.
It returned 1.7 percent in the first quarter, compared with 4.66 percent in the fourth quarter of last year.
"We had a return in line with the broader market," Slyngstad said.
The fund increased its bond holdings to 37.7 percent of its portfolio, from 37.3 percent three months earlier, and cut its equity holdings to 61.1 percent of the fund from 61.7 percent.
Its U.S. government bond portfolio was cut to 417 billion crowns ($70 billion) from 437 billion crowns three months ago, with its German government debt holding lowered to 78.4 billion crowns from 97.5 billion crowns.
Brazilian government bond holdings rose to 41.4 billion crowns from 30.9 billion and in Mexico its stake increased to 46 billion crowns from 36 billion crowns.
The fund's stake in Vodafone, worth 24.6 billion crowns three months ago, has also been reduced sharply and the company is no longer among the fund's top 10 equity holdings. ($1 = 6.0033 Norwegian Kroner) (Editing by David Goodman)