Wednesday, October 22, 2008

Our EPF Savings In Jeopardy

The Finance Minister, Datuk Seri Najib Tun Razak announced two days ago that the Government will inject RM5 billion into ValueCap Sdn Bhd to invest in “undervalued companies”, presumed to be those listed on Bursa Malaysia. This was part of the initial slew of high-level measures announced by the Finance Minister, who at the same time confirmed that there will be no cut in the budgeted expenditure for 2009, currently debated in Parliament.

He then further announced yesterday that the source of the RM5 billion additional investment will not be from the Government's budget but instead be sourced from Employee Provident Fund (EPF)!

To me, directing EPF to fund RM5 billion ValueCap investment to shore up Bursa Malaysia is an abuse of Government's authority and puts to risk hard-earned savings of millions of its contributors. This clearly is an example of Barisan Nasional's bad governance and damages the credibility of Datuk Seri Najib as our new Finance Minister.

This RM5 billion off-budget measure raises several very worrying questions and concerns:
  1. 1.What measures have been put in place to ensure that the RM5 billion will be utilised in a fair and transparent manner and not be used instead to bail out Government-linked or crony companies whose stock prices have plummeted during the current financial crisis? Will ValueCap for example, be investing a substantial amount into Malayan Banking Berhad who has been hit badly, to a large extent due to its purchase of Bank International Indonesia at exhorbitant prices?

  2. Secondly and more critically, how will supporting the prices of stocks listed on Bursa Malaysia actually change the fundamentals, including but not limited to the efficiency and productivity, of our economy and its companies? 

  3. Most importantly, while agencies such as the EPF are under the purview of the Finance Minister, he has no basis to direct the EPF to make particular investment decisions. EPF investments is led by an investment panel, headed by Y.Bhg. Tan Sri Samsudin b. Osman and they should be given the leeway to decide what they regard as the best investment approach to protect and grow the hard-earned savings of ordinary Malaysians.
As a trustee of members' savings, the EPF must discharge our responsibility with sincerity, honesty and trustworthiness at all times. The investment panel's key objective should be looking at making investments at best prices to maximise returns, instead of investing for the purposes of supporting the stock market which will inevitably put at risk the EPF contributors' interest.

The 2nd Finance Minister's attempt to reassure the public that ValueCap will make money for EPF isn't reassuring at all, as it fails to consider the very real possibly that ValueCap can at the same time lose money for the people!  Why must EPF be forced to invest via ValueCap when it has its own investment panel?

And since our financial institutions have been declared to be sound and financially stable, and hence not susceptible to the current global financial crisis, the Government should let the market dictate its stock prices, while the Government focuses its spending areas which will generate high economic multipliers for the economy.


Anonymous said...

Dear YB Tony,

In fact this is putting the concept of "bailing out" into another perspective called "invest in undervalued companies". If I was not mistaken, the Finance Minister even quoted the famous value investing concept popularized by Warren Buffet.

We don't mind if he knows how to evaluate the undervalued like Buffet. But to bail out their rich cronies or relatives (eg: brother) is a total abuse.

The US Social Security is going bust. Don't repeat the same mistake.

YB, please watch them carefully.

Anonymous said...

"To me, directing EPF to fund RM5 billion ValueCap investment to shore up Bursa Malaysia is an abuse of Government's authority and puts to risk hard-earned savings of millions of its contributors."
Can someone do something!!! My husband loss his job recently, have two boys education to take care(don't know if my second son can still continue his degree in 2009), hse loan and..... Can our goverment allow us to take our EPF to save our family life first.
God help us!

Anonymous said...

Thank you, Saudara Pua. As a contributor to the EPF, I cannot but feel terrified at the future loss of my hard-earned savings. i say future loss, because it is obvious even to a layman such as I, that giving RM5 billion to a Sdn Bhd company is the same as depositing this sum in an offshore account held by thieves. I hope the DAP and its erstwhile allies in PR will subject the the Finance Minister to the harshest questioning.

Enough is enough! How much more money shall be stolen by traitors? End it now.

Thank you.

Ooi Beng Hooi said...

Have we forgotten government investment vehicles bought MAS above RM 8 when the market price was only RM 3 something and TimeDotCom was bought at RM 3.30!

Anonymous said...

What can we as a contributor do? Can we file a class action to stop this?

Malaysian Malaysia said...

MTUC sleeping or still in slumber?

Get all millions to protest against using EPF $$$ for bail-outs !

Anonymous said...

Oh goodness, this is the case of former mamak PM style coming behind the PM in waiting. on the value cap.

Anonymous said...

Will you now reconsider your position to channel the Malaysia Bonus into EPF?

You may have your own opinion about what EPF *should* be, but we must recognize the reality of what it actually is... i.e. a potential black hole.

Donplaypuks® said...

Come on Tony

Let's not exaggerate. It's not EPF that is investing in this case. EPF is merely providing a loan, which being to the Govt, is capital guaranteed.

And $5 billion is a fraction of EPF's capital base. It's not quite Armegeddon (yet)!!

What is relevant is the interest rate EPF is charging, which should be about 7%-9% plus and/or share of profit, subject to a minimum return.

I noticed that Mamak Forexloosecanon Robocop, who once nearly bankrupted BNM with $6 billion in US$ forex currency speculation losses, remained silent or fudged over what EPF expects to earn from this loan.

You should pursue this with the Finance Minister in the interest of transparency.

There is nothing wrong in the Govt supporting Blue Chip share prices. This has been practised successfully by HK, S'pore and now the USA & Europe, directly or indirectly. More so since bourses across the Globe have been adversely affected mostly by the contagion effect from USA.

But something in Maybank's ill-advised investment in Indon smells fishy, besides the unheard of valuation of 4.8 times book value.

Without exception, such acquisition agreements would have a termination clause if the foreign Govt or relevant authority there (such as a central bank) changed the rules to have an adverse effect after the agreement has been signed.

Why didn't Maybank exercise this termination clause? Something stinks to high heaven and the previous CEO of Maybank who set things in motion and now sits in the PM's office, has to explain, pronto.

Lastly, how can BNM allow any bank to defy its instruction and advise? They should remove the relevant Directors from Maybank's Board!!

Anonymous said...

Like any business/investment decision, the maths have to come into play, prominently to assist in decision making.

Parameters like NPV, ROI and etc etc are more truthful than that Finance Minister II's reassurance or "trust me, coz I say so" attitude.

Emily Pratt

KoSong Cafe said...

I would agree with Tony that it was an abuse of power. But what can we do? Point it out and he will deny it, deflecting like a Tai Chi Master.

If the shares are really blue chips and under-valued, why can't EPF buy directly like what it has been doing, taking advantage of 'dollar cost averaging' to correct earlier share purchases at high prices? With its huge fund, surely it could withstand this period of financial turmoil and reap huge rewards for the benefit of members a few years from now.

Most laymen would immediately think of insider trading eg. buying the shares of counters earmarked before the company does and sell when the prices are being pushed up, or allowing crony shareholders to sell at favourable prices relative to the present weak market.

I happened to check Commerz announcement in M2U and Nazir had been selling and EPF and KWAP buying recently.

telur dua said...

Presumably, he wants to prop up the market.

Only an idiot will do that and with taxpayers' money too. How much can he actually buy? Valuecap's concerted buying will push prices up, the more the price goes up the more the fund managers will sell.

It is very much like a farmer buying back all his cows to ensure meat price remains high. But currently there is no market.

Please chalk this up as blunder #1 for Najib, even before he becomes PM. Mark my word, he will fail us.

Anonymous said...


Do you know how much EPF spend on renovation to their ofices all over the country?. The figure is well over Rm 1 million each and every time they renovate their office, more if it is a brand new branch.

Well. how do I know, cos' I know the supplier of interior items/materials to the contractor who got the contract.
Malaysia Boleh.

Anonymous said...

Government should definitely stop doing that. What if the money really goes into those government-linked or crony companies? Then the money would really go into drain. I don't think that Najib should be the finance minister, nor Abdullah who did a very bad job to our economy. Its time for UMNO to understand that prime minister is not always the one that is experienced in managing the economy. Prime minister should be equal to Finance minister.

ken said...

How they determine the under valued companies base on PE? But as what i know KLSE is highest amongst the ASEAN. Second, we cannot follow US solution because US inject 700 bil to increase the liquidity, but our finance institute yet has this problem, as commented by Dr. M how can RM 5 bil works if the creditors default due to economy crisis, RM 200 bil credit card plus other loan like car and housing loan, i think it over RM 1000 bil.

I think RM 5bil only enough to buy their cronies share to mitigate their loss. As some one did mention Maybank, they paid 4.3x higher price to buy BII we pay RM 5bil to fill up the loss.

Anonymous said...

In my 35 years as a stock analysis for one of the biggest stock broking firm my estimate is the KLSE will drop to 600 level with the 4th-Q.

Anonymous said...

Well, OK the abuse of power thing given. What is different about this now?

Essentially, EPF is funding a HEDGE FUND!- and one not well structured and probably managed.

PAC need to look at the interest rate being charged by EPF for the lending and other conditions. Is the loan guaranteed by the govt? Then its actually still a contingent liability of the govt.

If not, then it need to be charged a high interest rate because Valuecap is likely to be poorly structured particularly the shareholder liabilities which should be high...

BUT in the first place what is the govt doing running a hedge fund anyway?

NEO said...

EPF is name as "Kumpulan Wang Simpanan Pekarja" in Malay! The funds is belong to Pekerja or Employee which contributed to the funds.

Why the EPF Chairman and the Board didn't event know that they have to lent RM5 Billion to Malaysia Government until Najib made this announcement?

I think YB Tony should request the all the MPs to amend the EPF Act, in future, the Chairman, Board of Director of the EPF should be appointed by all its member through the AGM, just like other companies in Malaysia.

Actually, if the goverment intention is to assist the Bursa and all listed Malaysian companies, what our MoF should suggest are as follow: -

1. To give mandate to EPF to increase their investment in the Malaysia Equity Market by 5% or 10%

2. To call for an meeting which involved BNM, MoF, & all unit trust companies and insurance companies to pursuit these financial institutions to increase they investment in the Malaysia Equity Market.

Unless our new Minister in the MoF is very confident that ValueCap is the Best of the Best Fund Manager in Malaysia. If this is the case, why not suggesting all the financial institutions in Malaysia to surrender all the funds to ValueCap???

Anonymous said...

Hi really concern about this . If there is money to be made EPF should invest into these undervalued stock and return the profits to its contributors . Why should Value cap make all the money ? Many of us work very hard to make ends meet and many also look forward to their savings in EPF . Can we as contributors do something to stop this ? Like sending letters /email EPF board/MPs etc ? I believe PR should lead the way on this - unless PR feels the hardship of the rakyat is not to be considered at all ? We must protect our savings and let the govt know that its the future of the rakyat they are gambling with .

NEO said...

Najib has mentioned many times that Malaysia Econ is not & will not be crisis.

If what he said is true, then, his real intention is to save the under value listed companies in Malaysia such as Gamuda & Commerz.

The shares market go up and down! So, a temporary under valuation of certain listed companies is not the Gov Biz!

Unless the under valuation on Commerz have Jeopardise this counter to luanch it takeover bid on Maybank which certain persons walking in the Corridor of Power have planning for years.

@ today closing the market valuation for
Commerz is 22.9 Billions
Maybank is 25.1 Billions

Ya, I think Najib is right his brother and CIMB Bank is still required the RM5 Billions from EPF

Once, CIMB successful takeover Maybank, they will immediately become the largest bank in Malaysia - even largest than PBB with market cap RM30 Billions.

Anonymous said...

our retirement money is being used to replace hot money that comes in and goes out instead of being properly looked after as our safety net.

the BN administration does not spend enough money on real human capital development but trying to continue the market hype created by floating hot money

for past few decades, the world economy have shifted from bricks and mortars economy to hot air economy.

we used to measure the strength of an economy by tangible means such as what is being produced, how cheaply and efficiently it is being produced etc

nowadays economic value is being created by paper shuffling, advertising, preception, branding etc

although innovation is still a back part but corporate activities such as M & As, as well as speculations, have caused the price of goods and services and rental to shoot up to the detriment of the previous honest generation living on their savings based on previous salary levels.

Lee Wee Tak

Anonymous said...

PLS STOP THEM ! I don't want my EPF money to be gammbled away for a mere short-term technical-led, bear-market rally! As a professional chartist, we know where this down trend gonna go... and sharp traders will make use of any bear-mkt rally to re-position themslfs for a "better SELL!"...WHY NEVR ASK OUR PERMISSION BEFORE USING THE EPF MONEY!?!!

Ben said...

All EPF contributors objecting to this transaction must send in their objections now or forever keep your peace. If Tony is willing to head this movement, we cc to him to allow him to gauge the numbers and organize. What say you?

If they proceed against our instructions, we will file class action suit. Maybe, Karpal or Neo can help us establish locus standi.

Anonymous said...

True Story..
This is what happen in Gomen Dept

Takda contact/cable company quoted Rm 1.10 Per Sq ft (building materials)

Ada contact/cable company quoted Rm 2.50 Per Sq ft (building materials)
Requirement: 37674 Sq ft

Guess who got the job??
Answer: Ada contact/cable company.
Malaysia Boleh.

Anonymous said...

RM5bln. means RM30Mln in equity trading brokerage for CIMB ! - and the mkts will crash down to make another new low after that! We must ask: Wats their exit strategies? How long is the money on loan for? Does EPF has the right to terminate loan any time?

Anonymous said...

We should all take our EPF money out as much as we can and channel it to purchase houses, fund our studies, or even buy mutual fund. this will at least ensure we protect our money to some extent, and also ensure government have minimal access to our hard earned money

Anonymous said...

Let me ask few questions before you criticizing.

a. Do you know what is the size of EPF fund have today? The answer is about RM285Billions.

b. Let's wearing the EPF's hat, what would you do with such a big fund?

c. What is the track records that EPF making money out of the fund?
See the answer from:
They are achieving minimum 4.25% in year 2002, and they are making more returns in financial crisis year like 1987, 1997, and 2007.

d. How you keep your money safe? in which bank? and what is the return you get from the bank? Do you make more than what EPF made? If the answer is yes, then you might be able to criticizing EPF, otherwise, they seems like smarter than you do.

Anonymous said...

EPF achieving minimum 4.25% is rubbish.

Google who is on their investment panel before you criticizing.

It is the same gang who invest our EPF money into their public listed company.

It is the same gang who masterminded the ValueCap $5bil to "support undervalued companies"

Are we running out of talent in fund management ?

Anonymous said...

This is another method for KWSP to steal our money!

Remember during Budget 2008 announcement last yr, our Finance Minister (cum PM) announced that in order to assist KWSP members to reduce the burden in housing load repayment, KWSP will allow monthly withdrawal from members' A/C II for the purpose?
Sounds like a nice goodies!
When you apply for the monthly withdrawal, you only need to provide KWSP yr housing loan & instalment details
from yr bank and the bank a/c # you like KWSP to bank the monthly
withdrawal into it. KWSP will approve yr
application based on the available amt in yr A/C II and compute the withdrawal period by dividing the approved amt with the monthly instalment amt. Application process takes about a month and you will receive the monthly payout promptly into yr bank a/c!
Well everything appear to be nice and good. It was indeed a noble plan until you take to close look at yr KWSP Statement!

The withdrawal plan is actually a SCAM!

This is how the KWSP SCAM works.......

Assuming you have RM100,000 in yr A/C II and yr housing loan's monthly instalment is RM2000/mth.
KWSP will approve yr application of withdrawal from yr A/C II of RM100,000 and pay you RM2000/mth for the next 50mths.
Everything appears to be in order BUT.......

What KWSP didn't highlight to you is that when the application was approved, the TOTAL AMT (RM100,000) is removed from yr A/C II! It appears to be transfered to an unknown a/c to effect the monthly payment from therein.

The impact to the member are as follows :-
1. You just lost RM100,000 from yr A/C II. Assuming the KWSP Dividend is 5%, you will lose >RM4,000 in dividend during the 1st year. Based on the above example you will will lose >RM10,000 over the 50 mths period!
2. There is no statement to account for the amt approved vs amt paid, hence you would need to keep the monthly payment voucher to reconcile against the approved amt over the 50mths period to ensure there is no missing amt!

Assuming there are 100,000 members who innocently fell prey to this SCAM, based on the above example, KWSP would have cheated the members of 100,000 X RM10,000 = RM1,000,000,000 (that's RM1 BILLION) over the period!

Furthermore, if you discovered this SCAM early and intend to stop the plan, KWSP would not allow any cancellation of the plan until at least 1 year. That would mean, once the application is approved, based on the above example, you would have lost >RM4,000.
100,000 members would have lost 100,000 X RM4,000 = RM400,000,000 (RM400 MILLION) in One Year!!!

If you're a victim of this KWSP SCAM, would suggest you call yr MP to raise hell in Parliament!
For others who have not fallen into this SCAM, pls continue to watch out and alert yr family & friends about this.