This is one of the topics discussed in my chatbox this morning. It is also reported in various media here:
- http://www.bernama.com/bernama/v5/newsbusiness.php?id=365800 "Government Provides RM5 Billion In Additional Funds To Invest In Undervalued Stocks"
- http://www.nst.com.my/Current_News/NST/Monday/NewsBreak/20081020175413/Article/index_html "Valuecap would invest in undervalued stocks and protect investments in government-owned companies."
- http://www.bernama.com/bernama/v5/newsbusiness.php?id=365989 "Deputy Prime Minister/Finance Minister, Datuk Seri Najib Tun Razak announced that the government would provide RM5 billion in additional funds to double the size of Valuecap Sdn Bhd to RM10 billion to invest in undervalued stocks and protect investments in government-owned companies."
- http://afp.google.com/article/ALeqM5iInNgQ7ggUVplcGM109ox6W-S8Uw "Najib said the government will double the size of its state-run investment company Valuecap Sdn. Bhd, which was formed in 2003 to invest in under-valued, but fundamentally strong shares, by pumping in an additional 5 billion ringgit "
- http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_1808c204-cb73c03a-687ea900-8feee09d "20-10-2008:- Govt to pump extra RM5b into Valuecap "
Superficially, this news announced by our new Finance Minister seemed to have provided the market with some support this morning. Together with the spillover from regional recovery (e.g. Hong Kong +5.28%, Singapore +3.23%), and as can be seen from the KLCI intra-day chart below, the KLCI found a low of 888.28 just after 10 AM, before clawing back more than 21 points to close at 909.51. (+0.47%). Actually despite ValueCap, this is another "under-performance" of the KLCI relative to regional, although the comeback from the intra-day low is a slight improvement at +2.4%.
Someone asked if this is a good news. Obviously, something is better than nothing. However, we must note that the additional $5 Billion pledged is only a tiny 1% of KLCI market capitalization of nearly $500 Billion, i.e. in the longer term, probably little impact by itself, in terms of stopping the longer term bear. Note that ValueCap is one of Khazanah's portfolio (http://www.khazanah.com.my/portfolio.htm).