Wednesday, December 16, 2009

Why Is Khazanah Disposing GLC Shares?

Khazah has in the past 3 months been aggressively selling down its stakes in many of its majority owned government linked companies (GLCs). The latest disposal was the sale of 86.75 million shares of Tenaga Nasional Berhad (TNB) at RM8.10 each raising in exchange RM703 million for Khazanah.

In October and November 2009, Khazanah also sold approximately 114.9 million shares of PLUS Expressways Berhad, raising more than RM360 million. Prior to that, Khazanah had also sold 5% of Malaysia Airports Berhad in September.

(Note: the 114.9 million shares (RM360m) is higher than the 95.6 million (RM310m) shares published in other news portals because I had provided the wrong info, hence it's not their fault. Apologies)

On the surface, Khazanah has sold these shares on the pretext that they are intended to increase the free float and liquidity of the Malaysian stock market. It has been suggested that this would enhance the participation of foreign institutional investors.

However, it is uncertain if these sales are made with the sole intention of increasing the free float of these companies. For example, while Khazanah has disposed of 86.75 million shares in TNB, 50 million of these shares were placed to the Employee Provident Fund (EPF) which have little impact on TNB's free float.

(The Star had an article today which I missed earlier when issuing my statement. It notes that foreign funds were unhappy with the 50 million placement to EPF, for the same reason which I had raised)

In reality what has actually taken place is the TNB shares which were previously held with Khazanah, are now held by another government related institution, the EPF. The only difference is that the EPF which is funded by Malaysian workers have paid RM405 million for these shares to the Government of Malaysia. The EPF has also been a net buyer of PLUS shares.

As a result, it is critical for Khazanah to be transparent with the public as to the full rationale for these sales and what wil Khazanah do with the billions which will be raised from these sales.
(I)Will Khazanah be channelling these funds back to the Federal Government, which at this point of time is desperate for additional funds to top up its declining oil revenues and plug the budget deficit? It may possibly appear that the Government is so short of funds, that it is not only raising various new taxes, but also selling its stakes in GLCs to raise funding.

(II)Or will Khazanah be utilising its additional funds to top up investments in its biggest project – Iskandar Malaysia, which is facing shortfalls in investments due to its over-dependence on Middle-Eastern funds such Dubai World and Damac Properties? In addition, is Khazanah selling the GLC stocks because it needs the money to complete the required infrastructure for the land which has been sold to foreign investors as rumoured in the financial circles?
The above questions are particularly pertinent since Khazanah is also planning a US Dollar Exchangeable Sukuk next year to raise additional funds, secured with its shares in the Malaysian GLCs. This shows that the intent of Khazanah is not entirely to reduce stakes to “improve liquidity” of the local stock market, but actually to raise funds, as issuing sukuks will not improve market liquidity.

Khazanah must therefore explain fully the above questions to ensure that public funds are not abused, and more importantly, good money will not be used to chase after bad. Otherwise, not only will Khazanah be reduced to managing RM20 million heritage sites, it will also lose the trust of the Malaysian population.


A friend said...

This is an excellent analysis of possible economic management, Tony.

This is what we want a responsible future government and a strong and bold opposition like Pakatan Rakyat to do.

To question these important things that have been brushed under the carpet.

Anonymous said...

It's so obvious they want money and lots of it. If they call for a general elections in the near term then you know why they sell those shares. Otherwise why the need to steal sorry I mean sell, only those in the corridors of power will know, not even you Tony.

Donplaypuks® said...


You have to get Khazanah to disclose what it intends to do with all this cash. What does it suddenly need RM 1 billion for? More than that, were these shares sold directly or through 'special croney agents' who could have made a killing in commissions!!

More than that, Khazanah, like Temasik in S'pore, must open up its books to the Rakyat to show how exactly what is has invested in, its ROI and its realised and unrealised profit/loss since inception. Currently, Khazanah is operating in total secrecy.

It worries me that Khazanah is planning to frivolously invest in risky theme parks and businesses instead of in long-term blue chip investments.

We must force Khazanah to be completely transparent. It's our money and we have a right to know!!

We are all of 1 race, the Human Race

Anonymous said...

OK, we all know the no-good ultra-racists+bigots are all out make the final rush to milk money from the poor citizens.

Please make sure all the PR MPs attend and vote against the GST bill and ensure that it's rejected. The stupid man is doing all the wrong things for the economy, we don need to be taxed unnecessarily; as most of the money is (purposely/intentionally) wared anyway.

Anonymous said...

The latest report by Petronas that they will pay out the same dividend despite profit being Halved is another sure sign of money being tight.

I say we have a Boston Tea Party of our own. Port Klang Tea Party - We get teh tarik/kopi-o in large tanks and pour it in front of PKFZ doors.( I would like it to be PM residence in Putrajaya but it may be too hard)..

telur dua said...

The end is nigh. Make hay while the sun shines.

Anonymous said...

Why is the EPF using my hard-earned $$$ to fill up the Govt's coffers?

At the rate EPF is going, I have serious doubts whether I can withdraw my $$$ from EPF when I retire...

BTW, EPF is not Govt-related - 'cos it does not belong the Govt. They are merely trustees for millions of M'sians' hard-earned compulsory retirement contribution.

Anonymous said...

they just want to channel all the cash to the respective pocket as fast as possible,before the great crush... simple!

Anonymous said...

umNOooo is worry about GE13 so it is building up its war chest for the eRection OR knowing that it is facing a no winner situation, ketuanan Umno is pocketing the cash and sending them overseas via the money changers. Ketuanan is not smart but not that stupid either as in the case of Toyol in Selagor. Beware and take pre-emptive precautions. Make sure all numbers/books are inorder when the big day comes