THE market has began to speculate which stocks state-owned fund manager Valuecap Sdn Bhd will buy, analysts say, pointing out that many investors will be looking to ride on its coat-tails.
“Investors will always look to ride on big funds like these. Whether rightly or wrongly, the participation of big funds tends to push up the share prices,” said the head of research at an investment bank.
On Monday, the government said it would give Valuecap an extra RM5 billion, boosting its fund size to some RM10 billion, so the latter can buy undervalued stocks to provide support to the recently battered stock market.
Deputy Prime Minister Datuk Seri Najib Razak said yesterday that the government would get the RM5 billion by taking a loan from the Employees Provident Fund (EPF).
“The RM5 bilion announced for Valuecap is not part of the 2009 budget allocation, but instead is a consolidated loan from the EPF,” Najib said on the sidelines of an event in Kuala Lumpur.
Analysts voiced surprise that the extra funds would be coming from the EPF, pointing out that the fund also makes investments in the stock market.
However, some said since the funds are meant to boost the equity market, it made sense that Valuecap should be handling it rather than the EPF, as the latter allocates a substantial portion of its investment portfolio in bonds.
Valuecap, a highly-secretive fund set up in 2002 to buy undervalued stocks, invests specifically in the Malaysian equity market and is jointly owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and the Retirement Fund (Inc).
The government has left it up to Valuecap to decide how to distribute the fund.
Analysts generally believe it will be used to invest in solid index-linked stocks.
OSK Research said the funds could well be used to buy small- and medium-cap companies that present good value following the market’s recent sharp falls.
However, it believes Valuecap could get more “bang for its buck” by focusing on selected blue-chips.
In a report yesterday, OSK highlighted 11 potential targets on the Kuala Lumpur Composite Index (KLCI) that Valuecap may go for — MISC, Petronas Gas, DiGi, British American Tobacco, Petronas Dagangan, MAS, Sime Darby, Maybank, IOI, AMMB and MMC.
As it stands, however, funds like Valuecap will never reveal what stocks it invests in. It is obliged to make the information public only if its investments in a company exceed the five per cent threshold.
Yesterday, Second Finance Minister Tan Sri Nor Mohamed Yakcop said the extra RM5 billion being pumped in is sufficient for Valuecap to buy undervalued stocks and the government had no plans for now to give it more funds.
Some analysts, however, believe RM5 billion isn’t enough to shore up the market at all.
Citigroup’s Choong Wai Kee said the sum represents less than one per cent of the overall market capitalisation and less than five per cent of shares held by foreign strategic and portfolio investors.
And even if the full RM5 billion were to be pumped into the KLCI, it would theoretically lift up the key benchmark index by only 10 points, said OSK acting head of research Chris Eng.
“Then again, the RM5 billion would have a multiplier effect that is larger than its actual sum as the buying activity, or even anticipated buying activity by Valuecap could lift sentiment and push the KLCI higher,” he said. The thin liquidity on the stock market will also see the RM5 billion having a multiplier effect, he added.
“Investors will always look to ride on big funds like these. Whether rightly or wrongly, the participation of big funds tends to push up the share prices,” said the head of research at an investment bank.
On Monday, the government said it would give Valuecap an extra RM5 billion, boosting its fund size to some RM10 billion, so the latter can buy undervalued stocks to provide support to the recently battered stock market.
Deputy Prime Minister Datuk Seri Najib Razak said yesterday that the government would get the RM5 billion by taking a loan from the Employees Provident Fund (EPF).
“The RM5 bilion announced for Valuecap is not part of the 2009 budget allocation, but instead is a consolidated loan from the EPF,” Najib said on the sidelines of an event in Kuala Lumpur.
Analysts voiced surprise that the extra funds would be coming from the EPF, pointing out that the fund also makes investments in the stock market.
However, some said since the funds are meant to boost the equity market, it made sense that Valuecap should be handling it rather than the EPF, as the latter allocates a substantial portion of its investment portfolio in bonds.
Valuecap, a highly-secretive fund set up in 2002 to buy undervalued stocks, invests specifically in the Malaysian equity market and is jointly owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and the Retirement Fund (Inc).
The government has left it up to Valuecap to decide how to distribute the fund.
Analysts generally believe it will be used to invest in solid index-linked stocks.
OSK Research said the funds could well be used to buy small- and medium-cap companies that present good value following the market’s recent sharp falls.
However, it believes Valuecap could get more “bang for its buck” by focusing on selected blue-chips.
In a report yesterday, OSK highlighted 11 potential targets on the Kuala Lumpur Composite Index (KLCI) that Valuecap may go for — MISC, Petronas Gas, DiGi, British American Tobacco, Petronas Dagangan, MAS, Sime Darby, Maybank, IOI, AMMB and MMC.
As it stands, however, funds like Valuecap will never reveal what stocks it invests in. It is obliged to make the information public only if its investments in a company exceed the five per cent threshold.
Yesterday, Second Finance Minister Tan Sri Nor Mohamed Yakcop said the extra RM5 billion being pumped in is sufficient for Valuecap to buy undervalued stocks and the government had no plans for now to give it more funds.
Some analysts, however, believe RM5 billion isn’t enough to shore up the market at all.
Citigroup’s Choong Wai Kee said the sum represents less than one per cent of the overall market capitalisation and less than five per cent of shares held by foreign strategic and portfolio investors.
And even if the full RM5 billion were to be pumped into the KLCI, it would theoretically lift up the key benchmark index by only 10 points, said OSK acting head of research Chris Eng.
“Then again, the RM5 billion would have a multiplier effect that is larger than its actual sum as the buying activity, or even anticipated buying activity by Valuecap could lift sentiment and push the KLCI higher,” he said. The thin liquidity on the stock market will also see the RM5 billion having a multiplier effect, he added.
retracted from : The Star Online - Business Times
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