GLICs are likely to continue expanding their investment, especially in sectors which show potential growth
By DASHVEENJIT KAUR / Pic By ISMAIL CHE RUS
The upcoming general election (GE) is not expected to stop government-linked investment companies (GLICs) from boosting their investments in the local equity market.
The 14th GE (GE14), which is closely watched due to the fierce rivalry between both sides of the divide, must be called before August this year.
Sunway University Business School economics Professor Dr Yeah Kim Leng (picture) said GLICs’ investment decisions are largely based on the economics and returns.
He said as the political environment remains conducive and the risk is contained, GE14 will hold back GLICs’ investment in the local equity market.
“We expect GLICs to continue expanding their investment, especially in the sectors that are likely to show growth this year — namely the export-based sector, resources-based including the oil and gas, rubber and palm oil-based.
“We also see more opportunities presented to the GLICs to diversify their investment, especially in the Asean Economic Community member countries this year,” Yeah told The Malaysian Reserve.
The strong push for infrastructure development and the large capital needed for these major projects, would require the GLICs participations, he said.
“This year for GLICs portfolio investments, there could be major opportunities in the market for them in terms of good investments or value stocks,” he added.
Yeah said unlike the private sector, GLICs investment timing is not a significant issue.
A quick check on Bloomberg shows that seven GLICs control major companies in the country.
They have majority ownership of 30 public-listed companies and in terms of market capitalisation, they control about 40.62% of the FTSE Bursa Malaysia KLCI.
The seven GLICs are the Minister of Finance Inc (MoF Inc), Permodalan Nasional Bhd (PNB), Khazanah Nasional Bhd, the Employees Provident Fund (EPF), Armed Forces Fund Board (LTAT), Lembaga Tabung Haji (TH) and Retirement Fund Inc (KWAP)
As of December 2017, the total companies under the portfolios of all the GLICs, except MoF Inc, stand at 603.
EPF has 271 listed companies under its ownership holdings, according to Bloomberg data, with total current equity assets worth US$39.4 billion.
By industry sector, its largest current exposures are in the financials (40%) and communications (15.5%) sector.
Its largest five-year increase is in the financials sector, whereas its largest five-year decrease is in the consumer discretionary sector. By geographic region, its largest current exposures are in Asia Pacific with 95.8% and Western Europe (4%).
In terms of market capitalisation, its largest current exposures are in large companies accounting for 43.8% and mid-cap stocks (40.5%).
Malaysia’s pension fund, KWAP, has total equity assets of US$10.3 billion (RM42.23 billion) as of December 2017 with exposure in 182 listed companies.
KWAP aims to achieve a consistent total return over a five-year rolling period.
By industry sector, its largest current exposures are in the financials sector with 30.3%, followed by communications with 15.1% interest.
By geographic region, its single most largest exposure is in the Asia Pacific.
By market capitalisation, exposures to large companies account for 40.4%, while mid-cap stocks are 30.6%.
Pilgrimage fund TH is the third-largest in equity investment in listed companies in Malaysia, with 101 companies as of December 2017.
It has total equity assets of US$4 billion under management.
Its largest interest is in the financials sector with 35.1%, while utilities 18.9%.
Khazanah has investments in 14 listed companies as of December 2017 with assets under management of US$22.7 billion.
PNB, the country’s largest fund management company, has 33 companies under its portfolio with total current equity assets of US$4.5 billion.
By industry sector, its largest current exposures are in financials (63.4%) and consumer staples (10.8%). Over 90% of its investments are in Malaysia.
LTAT has stakes in 14 companies valued at US$1.5 billion.
Yeah said last year GLICs had been very selective in their investments and no substantial changes in their holdings during the 12-month period.
“They had to be very selective in terms of sectors and companies they were putting their money in, as some sectors were performing better than the others,” he said.