Valuecap, policy flip-flops and our money

The Story: The Malaysian government is pumping RM10 billion into buying undervalued stocks in Bursa Malaysia. Announced by PM-in waiting and Finance Minister Najib Razak on Tuesday.

Who/What is Valuecap? This is what I picked up from the Khazanah Nasional website.

Valuecap (Valuecap Sdn Bhd)

Established in 2002, Valuecap is a fund management company which was created to invest specifically in the Malaysia equities market. Owned jointly by Khazanah, PNB and KWAP, Valuecap’s key mandate is to undertake investments in equities listed on Bursa Malaysia on a portfolio basis, based on superior fundamental investment research.

The Edgedaily is cautious in its examination of the issue. Note these paragraphs.

Valuecap, which was set up in 2002 to add liquidity and volume to the market, has met these objectives, according to Second Finance Minister Tan Sri Nor Mohamed Yakcop, whose brainchild it was.

While analysts are in agreement that the market as a whole is undervalued and therefore presents opportunities for equity investments, several points should be clarified.

The first is whether Valuecap’s record of its return on investment matches the EPF’s benchmark. There is not much public information about Valuecap’s investment activities. However, currently, Valuecap is believed to have about RM4.9 billion worth of investments in 70 companies. And it has been reported that since its inception to September 2007, Valuecap has paid out a total of RM135 million in dividends. Better public disclosure will help to ascertain whether this passes the standard tests for financial performance.

A check with the registrar of companies shows that it is in the black and has assets of RM7.5 billion. So Valuecap has some value. But what is the return that EPF will get on the RM5 billion?

What the Trade Unions and the Opposition pols think about the whole thing, as Malaysian Insider reports it.

Md Nor Yakcop the second Finance Minister is optimistic about it.

Anwar Ibrahim said this.

Opposition leader Datuk Seri Anwar Ibrahim said the additional money was merely 1 per cent of market equity and would have no impact on the bourse which has plunged by more than 37 per cent this year.

It “serves no logical purpose other than to prop up some companies in the stock market,” he told reporters in Parliament.- Malaysian Insider.

The public’s view, as stated at Malaysiakini’s Vox Populi.

For perspective, this is an old press statement from EPF.

EPF Denies Involvement With Valuecap Sdn Bhd

The Employees Provident Fund (EPF) denies reports in today’s newspapers (November 20, 2002) which associated the operations of ValueCap Sdn Bhd with the EPF’s investments and two other state-run funds.

The EPF wishes to clarify that it has not appointed ValueCap Sdn Bhd to manage the EPF’s investment fund. The EPF also denies that its involvement in the KLSE is to shore up the stock market. The EPF’s investments are not used to bail out ailing companies.

The EPF invests in companies with sound fundamentals, long-term growth potential and competent management. The EPF is always prudent and professional in its approach when investing members’ savings. The Fund ensures that the investments are safe, not exposed to high risks and gives reasonable returns to its members for their retirement.

Deputy Chief Executive Officer (Investment)
Employees Provident Fund

Date: 20 November 2002

I reproduced the statement above simply to juxtapose the differing position on this matter (bailing out ailing stocks) just 6 years ago.

Another thing to note is that EPF is a shareholder of KWAP (Kumpulan Wang Persaraan) which is in turn a shareholder in Valuecap. So the pumping in of RM10 billion is essentially from EPF to its own company twice removed, or something like that.

Here’s something I’d like to know though. Who will decide which undervalued stocks to salvage and which will be allowed to die when the excreta hits the fan big time next year?

It’ll be nice to have some transparency in this matter. Especially since word has it that Md Nor Yakcop was the guy who lost us RM4 billion almost overnight during the 1998 crisis.

We deserve answers don’t we? Especially since many more of us can claim to be affected, as the EPF contributors surely outnumber the number of taxpayers.

If things go bust, then will the govt use policies like raising the age of eligibility for withdrawal, so as to stop paying out. The sums we have individually are surely minuscule enough not to affect EPF’s liquidity, but I don’t put it past the authorities to gamble with our money, and then lose it, and then lie to us about it.

This is Malaysia. Transparency is a new kid that everyone in power looks at very suspiciously.

So I call on civil society to scrutinise this and play the role of pressure group to ensure we ordinary Malaysians are not raped, again.


One thought on “Valuecap, policy flip-flops and our money

  1. This powerful commentary deserve a wider audience. Please get this on M-T or Malaysiakini la Sis. The rakyat needs to read this to understand the full implications of the government’s action.

    I’m glad you brought this up because everyone else is living in denial like Najib. (is the economy the only thing he is in denial of?). Economically, the worse is still a long way off and I don’t trust thatMat Noor Yaa’cob fella … he got his hands all over this ValueCap deal… and anything he touches …

    P.S. Yesterday’s news: 50,000 MY workers in SG at risk of being laid off.

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