Boosting Bursa Malaysia’s appeal

Wednesday March 31, 2010




By IZWAN IDRIS
izwan@thestar.com.my
PETALING JAYA: The Government is stepping up efforts to shore up the local stock market, as it seeks to boost Bursa Malaysia’s appeal to foreign investors.

Central to this plan is making more shares in government-linked companies (GLCs) available to a wider group of investors.
State-owned investment arm Khazanah Nasional Bhd yesterday started the ball rolling when it announced plans to divest its controlling 32% stake in Pos Malaysia Bhd. (See: Group may buy Pos Malaysia stake)
Over the past nine months, Khazanah had sold down stakes in Tenaga Nasional Bhd, Malaysia Airports Holdings Bhd and PLUS Expressways Bhd.

Prime Minister Datuk Seri Najib Tun Razak in his speech to launch the New Economic Model yesterday said national oil giant Petroliam Nasional Bhd had identified “two sizeable subsidiaries with good track records” for listing this year.
The Government is also considering privatising Percetakan Nasional Malaysia Bhd, CTRM Aero Composites Sdn Bhd, and biotech firms Nine Bio Sdn Bhd and Innobio Sdn Bhd.
“We have begun a review of a number of companies under Minister of Finance Inc and other agencies,’’ Najib said.
But the Government’s initiatives to pare down stakes in GLCs and float new ones in the market were perceived as “market neutral” by fund managers who attended the Invest Malaysia 2010 conference yesterday, as the declaration of intent had been made in the past.

“Fresh big initial public offers will increase the breadth of selection in the market. But the key to success will be persistence of the Government to execute its intention,’’ MIDF Research head Zulkifli Hamzah said.
At least one government-owned firm earmarked for listing yesterday declared that it was ready for life as a public-listed entity.
“Based on our track record, the milestones achieved, we are ready for listing this year,’’ CTRM chief executive officer Datuk Rosdi Mahumud told StarBiz yesterday.
CTRM is probably the largest manufacturer of composite aerospace parts in Asia and counts Airbus and Boeing among its key customers.
The company churned out a turnover of about RM300mil a year, while annual net profit was said to be around RM30mil.
“I think the appetite for IPOs is still out there, but investors would only be willing to pay a premium for good quality companies,” ASM Investment Services Bhd chief investment officer Rusli Abu Yamin said.
The FTSE Bursa Malaysia KL Composite Index (FBM KLCI) had risen 52% over the past one year to close at 1,319 points yesterday.
But despite the strong surge, the local market had remained mostly below the radar screen of foreign investors.
According to official figures from Bursa Malaysia, foreign investors comprised only 26% of the market, as opposed to 42% in 2008.

Najib said the Employees Provident Fund (EPF) presently dominated local equity and bond markets with up to 50% of daily Bursa volume represented by EPF-related trades, a situation he described as “not healthy for the market or for the EPF.”

The EPF has a total fund size of RM360bil and about a quarter of this is invested in the local stock market.
The total market capitalisation of all companies listed on Bursa Malaysia amounted to RM1.06 trillion yesterday.
“EPF will be allowed to invest more assets overseas, both diversifying its portfolio and creating more room domestically for new participants. EPF presently has about 6% of assets invested offshore and this will increase significantly,’’ Najib said.
The EPF will also increase its direct investments in the real economy of Malaysia, as an alternative to market investments – taking positions in healthcare, commodities, property and other long-term investments that match EPF’s requirements to protect the real rate of return on its assets.

“We strongly welcome the Prime Minister’s decision to allow the EPF to increase our overseas investment as it will help us diversify our investment and optimise our returns to members,’’ EPF chief executive officer Tan Sri Azlan Zainol said.


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