Fusion Investor Chatbox

This chatbox is for fundamental, technical and related discussions on investing in Bursa Malaysia. Registration is required to join. Please email me at fusion.investor@gmail.com with your preferred name and password and I will inform you when registration is confirmed.

Disclaimer: As usual, you are solely responsible for your trading & investing decisions.

Monday, October 20, 2008

ValueCap Sdn Bhd

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).


Seng said...

I am not sure how true this is, or how up-to-date this is, but this link shows ValueCap holdings here for future reference - http://bursa-chat.blogspot.com/2008/10/valuecaps-holdings.html

Do bear in mind as a general comment that anyone can simply post anything, although I personally have not monitored this blog and I do not have any opinion on this matter.

Seng said...

Stocktube also has an article on it here - http://stocktube.blogspot.com/2008/10/rm5-billion-shouldnt-government-seek.html.

"It is believed Valuecap has about RM4.9 billion worth of investment in 70 listed companies and the company which has assets of well over RM7.5 billion had paid out a total of RM135 million in dividends since Sept 2007. Nevertheless the returns of such borrowing to EPF from Valuecap is still unknown, not to mention the EPF account holders were being paid pathetic dividends every year."

jasonred79 said...

... Does everyone think that when government "provides 5b" that it means that 5b magically appeared out of nowhere?

That 5b has to come from somewhere. If it is EPF money, that is a bad sign... it actually means that money will be moving from our blue chips to the 2nd board goreng counters.

Either that, or it means 5b less in government spending?

This is NOT the same as when AMERICAN Foreign Funds or UK FFM or whoever decide to put FOREIGN money into our MALAYSIAN market.

This is taking from our left hand and giving it to our right hand.

My conclusion? This will turn out to be a bad idea, in the long run...

jasonred79 said...

So, if 5b is injected, does that mean that political pressure will dictate what Valuecap's managers do?

2 (equally) stupid scenarios:

1. Valuecap simply buys whatever BN tells them to, regardless of profit viability. (valuecap supports the market temporarily then loses a lot of EPF money)

2. Valuecaps managers decide to do the smart thing, and wait for market to hit bottom before buying in. (in other words, valuecap does NOTHING to support our market)

Basically, using a supposed "investment fund" with our rakyat's retirement funds, for the purpose of shoring up the market? It's a stupid idea, either way!


Oh, well done. According to this, it is suspected that Valuecap has lost 5 billion since it's inception. Great, just great...

Seng said...


Thanks for the LKS's link.

Interesting extract: "Second Finance Minister, Tan Sri Nor Mohamed Yakcop, who was then Economic Adviser to the Prime Minister, was reported by New Straits Times of 17th January 2003 as saying that ValueCap’s three shareholders had transferred the RM10 billion to it equally “in actual cash, and not in the form of shares” when “quashing rumours that the company did not yet have the full amount available”."

"Why then are Malaysians suddenly told five years later that ValueCap had only RM5 billion and not RM10 billion investment fund? Where have the balance of the RM5 billion gone to?"

Personally, I don't know what to believe. Did EPF transfer $10 Billion as claimed by Yakcop in 2003? Or was it just $5 Billion?

What is most concerning is that this is NOT TRANSPARENT at all.

1. Is there an Annual Report published by Value Cap that is widely available to the Public?

2. Does Value Cap publishes its holdings in a TRANSPARENT manner?

3. Exactly what is Value Cap's performance since 2003?

I really don't know the answer to these questions, besides rumours.