Asset disposal only when investment target achieved

Khazanah will only consider disposing of assets that have met financial and strategic targets

by ALIFAH ZAINUDDIN / graphic by TMR

SOVEREIGN wealth fund Khazanah Nasional Bhd will only consider disposing of assets that have met its investment target, amid pressures to raise money for government coffers by trimming its stakes in non-core assets.

Deputy Minister in the Prime Minister’s Department (National Unity and Integration) Datuk Dr Mohamed Farid Md Rafik said any deliberation to divest Khazanah’s assets — including real estate and technologies — will be made based on the financial and strategic targets set, the suitability of time and strength of the market, and, the availability of quality and credible buyers.

“Khazanah is not allowed to disclose in detail the assets to be disposed of in the current financial year as it requires the approval of various parties, including the board and regulators in and out of the country.

“This is to ensure that it is conducted in an orderly manner that observes the stipulated regulations,” he said in a parliamentary written reply to Datuk Abdul Rahman Mohamad (Barisan Nasional-Lipis) recently.

Mohamed Farid also said as a fund, Khazanah is constantly engaged in the selling and purchase of shareholdings.

Khazanah has made a total disposal of RM45.3 billion between 2009 and 2017. In 2018, the state-owned fund’s disposal amounted to RM3.8 billion against RM6.4 billion in 2017, he added.

A check on Bloomberg showed that Khazanah disposed of a total of 545.1 million shares in IHH Healthcare Bhd, Key Asic Bhd and Philippines-listed 8990 Holdings Inc last year. As at Dec 31, 2018, Khazanah held 16 securities worth US$18.73 billion (RM76.4 billion).

Following the completion of its 16% stake sale in IHH Healthcare, Asia’s largest private healthcare group, to Japan’s Mitsui & Co Ltd in March and the disposal of its shares in electronics manufacturer Globetronics Technology Bhd this year, Khazanah now has total current equity assets of US$14.2 billion under management invested in 14 securities.

The government is banking on the sovereign fund to raise money for its coffers, dragged by a fiscal deficit and a massive debt from a multi-billion dollar scandal at 1Malaysia Development Bhd.

As such, Khazanah is now embarking on a refreshed mandate to grow the country’s long-term wealth.

The fund decided to revamp its investment playbook by classifying its portfolios into separate commercial and strategic funds, after reporting its first-ever negative earnings in over a decade.

The US$39 billion fund posted a loss before tax of RM6.27 billion in 2018, with an impairment of RM7.3 billion — half of which were attributed to national carrier Malaysia Airlines Bhd.

Citing unnamed sources, Reuters had previously reported that under the new strategy, Khazanah will look to trim stakes in some non-strategic firms to 15% to 25% near the typical holding levels of pension funds.

Khazanah is also looking to reduce its physical presence in overseas locations such as London, Mumbai and Silicon Valley in the US, it said.