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Malaysia’s Biggest Fund Buying Stocks as Foreigners Sell

Malaysia’s largest pension fund said it was a net buyer of the nation’s stocks during recent declines as foreign investors cut their holdings.

The Employees Provident Fund, which manages more than $170 billion of assets, bought good quality and fundamentally sound shares, Mohamad Nasir Ab. Latif, deputy chief executive officer of the fund, said in an e-mail interview yesterday. The FTSE Bursa Malaysia KLCI Index fell 6.8 percent from its July 24 record through Aug. 28 before rebounding 5 percent. The gauge slid 0.1 percent at the 5 p.m. close in Kuala Lumpur.

“Being the biggest investor in Malaysia, we view any market extremes as opportunity for us to rebalance our portfolio for continuous return and risk diversification,” Kuala Lumpur-based Mohamad Nasir said. “We believe Malaysia is in a stronger footing forward and we expect investors’ interest to come back to this region, especially the emerging countries.”

Malaysia’s second-biggest pension fund Kumpulan Wang Persaraan (Diperbadankan), Thailand’s Government Pension Fund and Indonesia’s state retirement scheme PT Jamsostek have also said they bought local equities during the recent regional market rout, triggered by concerns over the U.S. potentially tapering its monetary stimulus. The four Southeast Asian funds manage a combined $229 billion of assets.

The KLCI index traded for 14.9 times earnings estimates for the next 12 months on Aug. 28, the lowest level since April, and was valued at 15.7 times today, data compiled by Bloomberg show. Foreigners sold 6.8 billion ringgit ($2.1 billion) of Malaysian stocks in August, exchange data showed.

Stimulus Concern

The MSCI Southeast Asia Index has dropped 15 percent since May 22, when the U.S. Federal Reserve signaled its asset-buying program could be trimmed if the U.S. economy showed a sustained recovery. Global funds pulled about $44 billion from emerging-market stock and bond funds since the end of May, EPFR Global, which tracks fund flows, said Aug. 23.

The Malaysian pension fund, known as EPF, is looking at real estate opportunities in Europe and the U.S. to diversify risk, Mohamad Nasir said. The fund currently has about 1.5 percent of its total assets in global properties, which are mainly in the U.K and Australia, and this will naturally increase as the fund size grows, he said.

The fund also plans to raise its overseas investments to 23 percent from 20 percent to widen its earnings base, he said. EPF will continue to expand its international mandates which cover both bonds and stocks in Asia as long as they meet certain investment criteria, Mohamad Nasir said.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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