The MYR20 billion ($4.69 billion) to be pumped into state equity investment firm ValueCap Sdn Bhd will not come from the government’s coffers nor have a government guarantee, Minister in the Prime Minister’s Department Abdul Wahid Omar reiterated.
Omar explained that the MYR20 billion would be sourced from ValueCap’s three shareholders – state investment arm Khazanah Nasional Bhd, pension fund Kumpulan Wang Persaraan (Diperbadankan) (KWAP), and equity investment firm Permodalan Nasional Bhd (PNB).
The minister had, a month ago, clarified the source of the funds to the local media. He had also noted that the injection will not affect the national Budget 2016, announced last Friday.
Omar said, the fund would invest in undervalued listed companies with good fundamentals and long-term growth potential, and those investments would be carried out in stages, based on the right price and timing.
This will indirectly contribute positively towards the activities of listed companies and towards the economic growth of the country in general, he added.
The Prime Minister, when announcing the fund injection on September 14, had said the fund was to shore up the local stock market, which has been relentlessly hit by negative news – soft oil and commodity prices and allegations against state investment fund 1Malaysia Development Bhd (1MDB).
The fund from ValueCap’s shareholders would be supplied in terms of bonds, and external funds or other forms of capital will only be considered if it was approved by the board.
“The investment fund is not aimed at helping any [particular] company, be it bumiputera (native people) or non-bumiputera. The investment is based on the philosophy of long-term but not short-term investment.”
“It is based on the thorough and careful evaluation of the financial performance of the stocks,” Omar said, in a written reply to a member of parliament (MP), Khalid Samad last Thursday. The comments were made available to the press on Monday.
Omar mentioned that companies that declare good dividends and defensive stocks would be picked, such as Malayan Banking Bhd, United Plantations Bhd and real estate investment trusts with dividend yield of more than 5 per cent a year.
Khalid had asked the Prime Minister to state the source of the MYR20 billion that would be used to help the Malaysian stock market, and whether the ministry had made any research on whether the amount would be able to improve the current stock market.
On September 15, opposition party PKR’s secretary-general and MP Rafizi Ramli raised concern that the MYR20 billion would eventually be used to buy undervalued shares and that the fund would be directed to buy shares from companies that are deemed close to ruling party Barisan Nasional for the purpose of making short-term profits.
Omar noted that ValueCap had recorded a stellar performance with a return of equity investment of more than 16.3 per cent a year between 2003 and 2013.
As at end-2014, ValueCap had an accumulative profit of MYR8.5 billion, of which a total of MYR8.4 billion was allocated back to the shareholders in the form of dividends. The fund was established in 2002.