Tuesday, October 21, 2008

I wasn't Wrong

Hantu Laut

I wasn't wrong in my suspicion of the government intention to prop up the stocks market.

Below is what I wrote on 9 October, the full article here.

"Surprisingly, while all other Asian markets went down quite substantially the KLSE went down only 2.71%.Is our fundamentals really that strong and investors confidence unshaken in spite of all the bad news on the global financial markets? Is the government trying to prop up the market to avert panic selling? If that is the case how long can the government continue to do so and where are the funds coming from? Let's hope it is not our money or worse still the EPF money."

Read the article below:

EPF to lend the RM5b to fund Valuecap

By Adib Zalkapli

KUALA LUMPUR, Oct 21 — Finance Minister Datuk Seri Najib Razak said today the government will borrow RM5 billion from the Employees Provident Fund to fund government investment agency Valuecap Sdn Bhd.

"It's not part of the Consolidated Fund. It's a loan from EPF," said Najib.

The Deputy Prime Minister pointed out that the loan would not be part of the Budget 2009 allocations for spending announced last month.

Yesterday, Najib announced a host of measures to boost the economy and protect Malaysia from the effects of the global financial turmoil.

These included spending more on the service sector to cushion expected declines in Malaysia's exports.

Also, RM5 billion would be injected into Valuecap to buy undervalued stocks.

Valuecap was set up five years ago to invest in undervalued firms.

The government hopes the injection will offer much needed support for laggard blue-chip stocks in the local bourse.

The Finance Minister is expected to announce more measures on Nov 4 when he winds up the debate on the Budget in Parliament. Read more.......

Is the government paying good money to chase bad money.

Beware of the vultures (hedge funds) they may come back to take your money away.


Anonymous said...

quick fixes, short cuts, bail outs, paper over the holes; - these are things that governments do to their people. where is malaysia's Obama?

donplaypuks® said...

Will EPF be able to declare a 6% dividend for 2008?

But given that even in die-hard (hypocritical) free-market non-interventionist USA, Bush is bailing out public and private-sector companies, there is nothing wrong in our Govt supporting the market. Especially, we are at the receiving end of a USA & Europe problem that has spilt over to Asia due to the contagion effect.

As long as the Govt is transparent and spends the money buying real BLUE CHIP companies whose share prices have all fallen by about 50% over the last 6 months, taxpayers should be happy.

kittykat46 said...

I thought one of the lessons of the 1997/1998 crisis was its futile for the government or related agencies to use funds to artificially "prop-up" the markets.
The big speculative funds have far more muscle than anything that Valuecap can put up with.
If Valuecap is trying to buy in, with the speculators selling off, you would just be feeding their profits.
EPF could get very badly burned with this - and there goes the retirement funds of thousands of struggling wage earners...

kittykat46 said...

By the way, the Bush Administration is NOT propping up the market stock value. The two core proposals of the massive US bailout plan are a) Buying up non-perfoming assets of the banks
b) Injecting fresh capital into troubled banks, with Government funds if necessary.

Simply going into the market and using government controlled funds to be another market player is a pretty dangerous way to employ EPF retirement savings.

Hantu Laut said...

There is a big difference between what the US Government is doing and from what our government is trying to do.

The US inject fresh capital into ailing banks to save the banks and depositers from losing their money and confidence in the financial system.

The Malaysian government is using pension funds(EPF) to play the stocks market which they have no control whatsoever.Big hedgefunds can come back and play the market and liquidate their positions when they have made enough profit and take the money out of the country.

If the government borrow from the EPF they should issue government bonds at higher interest than its normal bonds.RM5 billion is not a lot to prop the market.It can disappear very quickly if the market decline, which is very likely.

Hantu Laut said...

You are absolutely right.

SM said...


Yup, you weren't wrong.
You were VERY WRONG!
Najib & our Government is doing ALL it can do "protect" us from any Financial Disaster lah (by the way, as I've said before, can someone please wake up Pak Lah?!).
You think Najib will do anything to harm our Economy ah? Yes lah, they use some of our hard-earned savings...but then, haven't they done this "type" of manipulation before?
I remember years ago when Bank Negara lost Billions "playing" the Forex Market. But, we still survived didn't we?
Is ok lah, as long as the "succession" plan is going as scheduled, never mind a few Billion Ringgit here & there kan? I mean you have to give it to UMNO, ever since the last GE, they have been very "focused" on the "succession" plan.
Is ok, Malaysia Boleh...we will survive another scandal brought upon by the BN (read: UMNO) Govt!

Anonymous said...

Hmmm, if anything.. will Sabah, the Fixed Deposit for Najib be auctioned?

Hantu Laut said...

It is not the amount of money.MR5 billion is nothing to EPF and the government certainly can pay it back.It's the principle that is wrong.No government should touch pension funds.

The government should float their bonds in the market to raise funds for the purpose.Maybe, the government is afraid that with the current global financial upheaval the bonds might not be well received by the financial community.

That's the only reason I could think of.

Asking EPF is easy lah! Cause they control it.

donplaypuks® said...

Even in 1998, the HK Govt, with the backing of China, mopped up some (I believe) $30 billion of Plc blue chip shares which were adversely affected because of excessive specualtion by foreign hedge funds and currency traders.

Several other Asian Govt responded in similar fashion.

The HK Govt later made a whopping profit on these shares. Thus, hedge funds willl get burnt and run for cover where you have prompt action, and firm and strong Govt.

What the US is doing now has a direct or indirect effect on the DJ. $175 billion is reserved for direct equity investment in commercial banks and investment banks, while some of the banks are now talking about new acquisitions.

Similarly UK and Europe banks have been nationalised. In many instances, it is not that the banks are bankrupt, but they have a short to medium-term cash flow problem.

Under these circumstances and trying times, we cannot wait for market forces to respond before we see a total collapse in M'sia.

Prompt Govt action is necessary and buying blue chips which are artificially trading at below NTA or at deep discounts values is necesssary to restore confidence and ward off speculative elements.

And do remember that EPF is lending the money to a Govt entity and not investing directly in Valuecap. The funds are as safe as houses.