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Malaysia to Tap $317 Billion Savings Pool for Mid-Cap Stocks

Malaysia to Tap $317 Billion Savings Pool for Mid-Cap Stocks
Pedestrians cross the street at a pedestrian crossing in Kuala Lumpur. To help lure foreigners, multiple-entry visas for as long as five years will be granted to qualifying business investors and fund managers. Photographer: Sanjit Das/Bloomberg

Malaysia Prime Minister Najib Razak said he wants government-linked investment companies, including the Employees Provident Fund, to play a more prominent role investing in good-quality local mid-sized stocks.

The Southeast Asian nation possesses a collective savings pool in excess of 1 trillion ringgit ($317 billion) which can be potentially tapped to help mobilize capital, the prime minister said a speech in Kuala Lumpur today. The EPF, which reports to Najib as finance minister, oversees $176 billion and was ranked the world’s sixth-largest state pension fund by asset size by Towers Watson & Co. in August.

“By setting a specific objective to increase the velocity of shares traded, they can make a significant contribution to overall market vibrancy,” said Najib. “Their participation will provide another avenue for companies to access primary and secondary funding to bring their businesses to the next stage of development.”

His comments come three years after Najib urged state agencies to scale back domestic business holdings to help boost market liquidity and allow breathing space for other investors. EPF has since raised its overseas interests, while state investment company Khazanah Nasional Bhd. has cut stakes in listed Malaysia Airports Holdings Bhd. and Tenaga Nasional Bhd. and listed hospitals operator IHH Healthcare Bhd.

“We are already investing about 20 percent in mid-cap shares,” Shahril Ridza Ridzuan, EPF’s chief executive officer, told reporters in Kuala Lumpur today. “We might increase the percentage if the companies are good.”

Entry Visas

About 15.7 percent of EPF’s assets at end of 2012 were in overseas investments, the pension fund said in a Feb. 17 statement. The fund’s biggest mid-cap holdings currently include cement producer Lafarge Malaysia Bhd., palm oil producer United Plantations Bhd. and vehicle assembler Oriental Holdings Bhd., according to data compiled by Bloomberg.

The 30-member FTSE Bursa Malaysia KLCI Index fell 1.1 percent today. The benchmark has climbed 3.9 percent this year, underperforming regional peers in Indonesia and the Philippines which have both risen more than 7 percent, according to data compiled by Bloomberg. The broader FTSE Bursa Malaysia Top 100 Index has gained 6 percent this year.

To help lure foreigners, multiple-entry visas for as long as five years will be granted to qualifying business investors and fund managers, Najib said. The prime minister also announced a plan to groom 1,000 graduates for the securities and derivatives industry which he said will kick off within weeks.

Last year, Najib announced an initiative to develop a forum for the trading of unlisted securities and alternative investment products. The virtual platform, known as myULM, will be rolled out in 2014, the premier said today.

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