by MARK RAO/ graphic by DYG NORAZHAR

KHAZANAH Nasional Bhd’s shareholding value in listed firms dropped by over RM6 billion in this quarter as lacklustre equity market continues to drag stocks owned by the state investment fund.

Malaysia’s sovereign wealth fund has investments in 14 listed firms — locally and abroad — with a total shareholder value of RM58.1 billion as of last Friday.

But the challenging market conditions and dismal trading sentiment have wiped out approximately US$1.45 billion (RM6.1 billion) from the fund’s investments in listed companies compared to the fund’s position at the end of June this year, based on Bloomberg’s data.

Its investee, Axiata Group Bhd, is among the largest loss for the government-owned fund.

Foreign investors fleeing the local equity market had also thinned the fund’s total shareholding value.

The failed merger between Axiata and Norway’s Telenor ASA dragged both telecommunication giants.

Khazanah has 3.37 billion shares or a 36.93% stake in Axiata, instantly making the fund RM2.39 billion poorer in total value. From the end of June until last Friday, Axiata’s share price has dropped 71 sen or 14.3% to end last week at RM4.27.

The Axiata-Telenor deal would have also witnessed the merger of Axiata’s Celcom Axiata Bhd and Telenor’s Digi. Com Bhd, which would have created Malaysia’s largest mobile operator.

In banking, CIMB Group Holdings Bhd lost about 6.7% or RM3.5 billion in market value from the start of the third quarter until last Friday.

Negative sentiment in the banking industry had dragged the banking group. Khazanah holds a 23.54% stake in CIMB after transferring 335.7 million shares in the company in July this year based on lending agreements with CGS-CIMB Securities Sdn Bhd, Credit Suisse Securities (Europe) Ltd and JP Morgan Securities plc respectively.

This is in relation to an exchangeable bond issue exercise undertaken.

Khazanah also has a 66.06% stake in UEM Sunrise Bhd, Tenaga Nasional Bhd (27.27%) and Telekom Malaysia Bhd (26.16%).

Khazanah’s value in these stocks shrank by RM697.22 million as negative sentiments weighed on the equity market and these three companies.

Despite the dismal performance of the equities in its investee companies, the state-owned fund has been on a selling spree to dispose of non-critical assets.

Prime Minister Tun Dr Mahathir Mohamad, who is also Khazanah chairman, said the government stands to benefit from the sovereign wealth fund selling off its stakes and assets which do not form part of its core businesses.

Dr Mahathir said the fund had strayed outside its core businesses and invested in too many things. He said this during a recent interview with BFM radio.

Khazanah had disposed of a sizeable stake in IHH Healthcare Bhd and Desaru Investments (Cayman Islands) Ltd for RM8.42 billion and RM288 million respectively.

The sovereign wealth fund also sold the office and retail portion of its Singaporean property investment, namely the Duo project, for RM4.7 billion in July this year. Khazanah is the majority holder of the asset via its 60%-owned joint venture company, M+S Pte Ltd.

This week, it divested its 100% interest in Prince Court Medical Centre Sdn Bhd to IHH for a cash consideration of RM1.02 billion.

Meanwhile, the fund had hired Morgan Stanley to look at strategic options for its stake in the loss-making national carrier, Malaysia Airlines Bhd.

It was also reported last week that the fund received an offer of about US$500 million for its stake in an Indonesian toll-road operator.

The recent and prospective stake sales and asset disposals could also be in view of the fund’s sizeable debt commitments.