Saturday, December 06, 2008

ValueCap Not For Bailouts?

Finance and Deputy Prime Minister Datuk Seri Najib Razak continued to insist that the RM5 billion injection of public funds into the Valuecap Sdn Bhd investment fund will not be used to either bail out the politically connected of any government-linked companies (GLCs) as reported in the media today.

His denial has come to calm public fears and unhappiness over the move to direct the Employees Provident Fund (EPF) to lend the RM5 billion to Valuecap.

However, his assurances lacks conviction for he has still begs many many questions.
  1. With so many credible foreign and local investment and fund managers with extensive experience in the local markets, why is it that the Government is not direct funds to these institutions to “value invest”? Why is it that the Government is directing these funds to a little known company, ValueCap, with uncertain, opaque and questionable track record to invest such a large sum of money?

  2. The fact that the original bond amounting to RM5.1 billion which will expire in March 2009 has been further extended beyond the terms of the agreement raises the question as why a company which has not been able to repay such an amount, be extended an additional RM5 billion? ValueCap is set to become one of the rare fund management company in the world which invests with nearly 100% of its investment capital sourced from loans and not from investors.

  3. After initial protests by the public on EPF's loan to ValueCap which is subjected to extensive risks, the Government took the most irresponsible step of becoming the guarantor to the loan. What that essentially means is that should ValueCap fail to repay the EPF, the tax payers will then bear the burden of the loan. 
This measure will also create a moral hazard situation whereby the fund managers will likely adopt a high risk investment strategy since there is no “downside” to the investment for the Government will bail them out in the event of failure.

In fact, the repeated attempts to provide verbal reassurance on EPF's RM5 billion injection by the Finance Minister clearly demonstrate continued public opposition to the measure since it was first announced more than a month ago.

Hence, Datuk Seri Najib should do what a responsible Finance Minster should do, that is to reverse the RM5 billion injection decision, and instead place appropriate pressure on the EPF investment board to improve the performance of its investment returns.

15 comments:

Anonymous said...

well... they taught they would be brilliant enuff to be more successful of others fund managers such as Public, HL and others.
In fact, the gov are only helping the company 'sink' faster by pumping more loans for bad track records company..
do let me know if gov need to find another company to help with.. mine certainly need gov to be guarantor also .. :p

Solid Leong said...

He can make as many assurances as he can. I'm not buying it because history tells me not to. Economy is bad so dont put more burden on the rakyat for once.

Calvin said...

its not for bailout, its to repay ValueCap's debt!

Anonymous said...

The idea Valuecap is not a bailout is typical of Najib's ideas. Its more fluff than real. Basically the idea of Valuecap is to fund what is risky equity investment with long term bonds. Essentially the risk is the same as bailouts and in fact it is. What is different is the choice of bailouts. Typically bailouts are for companies in very severe risky conditions which would not survive otherwise. There are smart bailouts and dumb bailouts. Smart bailouts make sure there is a plan before its done, dumb bailouts well, don't care, the downside is not acceptable. In the case of Valuecap the companies are not in dire straits but the upside is also not for certain. But Valuecap don't put money directly into the company which means that as a bailout mechanism its pretty crappy too. It is a bailout of a market or comapnies that are much much bigger than it can do. Its basically pissing in the wind as far as intend is concern.

ITS LOUSY INVESTMENT IDEA!!! It screws the EPF holders risk and return wise which would be better off investing in high yield corporate bonds which basically have lower risk and higher returns.

If the market takes a dive, EPF holders would be screwed. If the investment does not return more than the coupon, EPF holders are screwed too. A strong market return means the EPF holders get their money back BUT not the upside.

IT IS A BAILOUT no matter how you slice it.

nik271 said...

YB, I want to raise the issue of "greedy" property developers. I remember when oil, steel and cement prices were at record highs early this year, most developers raised their property selling prices, with excuse of high construction cost due to high global oil, steel and cement prices. But now, oil prices has dropped 67% from its highs, steel prices has dropped 60-70% (depending on types) from its highs, but those "greedy" developers still continue to sell property at those old record oil, steel, cement prices. This is pure greedy!

YB, please raise this up in parliment, as we rakyat are suffering to make ends meet, and it is unfair for "greedy" developers to squeeze the rakyat for big profits. Housing is a basic necessity of life, and "greedy" developers should not take advantage of it.

Anonymous said...

what is Najib's qualification to head the finance ministry

does he have any relevant extensive financial management experience and track records?

G Bush does not manage his economy in a direct capacity, he employees Alan Greenspan for that.

In Malaysia, we seem not to let the professionals run the show. Look at our sports association. What's the ratio between ex-international / state players vs politicians in running of the football in Malaysia?



regards
lee wee tak

Anonymous said...

STOP HOODWINKING US!

ValueCap itself is a BAILOUT !!!

Anonymous said...

Our money is UNMO's money

telur dua said...

A bailout by any other name (or disuise) smells just as rotten.

When one lie too often one tends to believe one's own lies. UMNO has this in-born talent. No wonder Malaysia is $#@ked.

Anonymous said...

I dare you tell me just one GLC company that have really been successful and stayed in profitability...

Simon Seow said...

And poof goes our money, Tax or EPF still da same.

ChengHo said...

Talking is free you have any suggestion so far nothing is impressive from you in the parliment.

Anonymous said...

Is it fair for the present state govt of selangor taking over the liabilities created by the previous state govt? At least ABB think it is so. Read todays star

Anonymous said...

Tony,

Valuecap, is just another tool to fool the rakyat of daylight robbery.

IF Najib is really a responsible leader he should reveal the following;

i) the Portfolio of Valuecap.

ii) The buying prices or the entry prices of the stocks in the portfolio and the date of entry.

iii) Current Value of each stock vs entry price.

iv) Net Profit/Loss of the porfolio.


Unless we see the figures, we cannot take their words as true. Figures never lie but the politicians do.

Moreover, we still remember that M. Nor Yaacop once managed to cheat Tun Mahathir. He said that Bank Negara only paper loss in Forex. What happpen thereafter is well known.

I bet you Tony, history will be repeated. This round it is the EPF instead of Bank Negara.

If Pakatan Rakyat take over, ake sure that this Second Finance Minister and Najib rotten in jail.

They are blowing away billions.

Anonymous said...

VERY SIMPLY...

KWSP made investment in stock market...
Valuecap Made investment in stock market...

THEN WHY NEED TO ASK VALUECAP TO INVEST??????

What the special of Valuecap, until goverment need to invest million million ringgit in to them?