EPF: Govt needs to sell down equity stakes

MALAYSIA'S state pension fund, the Employees Provident Fund (EPF), wants government institutions to further reduce their ownership in the stock market to create greater liquidity, its chief said yesterday.

"We would love to see all the other institutions like Khazanah sell down their stocks so there'll be a bit more liquidity for these stocks for other institutions to come in," EPF chief executive officer Tan Sri Azlan Zainol said in an interview.

Khazanah Nasional Bhd, the investment arm of the Ministry of Finance, controls some of the largest listed companies on the Malaysian stock market, and big state shareholdings have meant that foreign investors own just a fifth of Malaysia's shares.

EPF has more than RM360 billion in assets and is among the largest investors in the Malaysian stock market, holding stakes in almost every major listed company.



The fund recently said it plans to increase its overseas investments to 10 per cent of its total assets from about 6 per cent now, and Prime Minister Datuk Seri Najib Razak said in his "New Economic Model" for Malaysia on Tuesday that this process should accelerate. EPF may cap its overseas exposure to 15 percent of its total assets, said Azlan.

"We need to have a mix of government securities, government bonds, Treasury assets, property and so forth," he said.

"Our allocation for equity, we can go up to 30 per cent but going overseas I would feel a comfortable level for us is about 15 per cent of our total funds ... and in various asset classes." Azlan, a former banker, said EPF is still looking for a buyer for its stake in RHB Capital, Malaysia's fourth-biggest bank by assets, as it wants to reduce its ownership in the lender to 40 per cent from 57 per cent currently.

"There are always a lot of people who want to buy (our stake in RHB), but they want to buy at a cheap price," said Azlan. "The price at the moment is a bit undervalued." EPF sold a 25 per cent stake in RHB Capital to Abu Dhabi Commercial Bank in 2008 for US$1.23 billion (RM4.02 billion). The deal valued RHB at RM7.20 a share. RHB currently trades at RM5.65.

Azlan said the pension fund is supportive of Hong Leong Bank's recent proposal to buy out smaller rival EON Capital (EONCap) in a RM4.9 billion deal. EPF owns about 10 per cent of both Hong Leong Bank and EONCap.

"We feel Malaysia needs to reduce the number of banks," he said.

Hong Leong Bank, the country's sixth-biggest lender, on Tuesday made a fresh offer for EONCap's assets and liabilities in an all cash deal.

A merger between Hong Leong and EONCap will create the country's fourth-biggest bank, with about RM165 billion in assets.

EPF has not decided whether to accept an offer led by Malaysian billionaire T. Ananda Krishnan to buy out the remaining shares in Astro All Asia Networks, Azlan said, in a deal that values the pay-TV monopoly at RM8.5 billion.

The pension fund owns about 9 per cent of Astro.

"There's no specific (offer) document to come to us yet. When it comes, at RM4.30, we will have to look at it and make a decision," he said. - Reuters