> Government not to use EPF Funds!

The government's move to inject RM5 billion into Valuecap Sdn Bhd, the government investment agency, to buy undervalued stocks in the local bourse is a viable investment, Second Finance Minister Tan Sri Nor Mohamed Yakcop told the Dewan Rakyat today.

He said this was based on Valuecap's growth and its profit between 2003 and now. Valuecap's portfolio had grown from RM5 billion initially to RM8 billion now.

"Furthermore, there is a special panel in the Employees Provident Fund (EPF) that will provide thorough inputs in terms of risk management of funds.

"Hence, I'm confident this investment is a wise and viable one," he said when replying to a supplementary question from Datuk Zahrain Mohamed Hashim (PKR-Bayan Baru) during question time.

Zahrain had queried on the mechanism used by the government to convince EPF contributors that the investment in Valuecap was guaranteed of returns.

Deputy Prime Minister and Finance Minister Datuk Seri Najib Tun Razak announced on Monday the government would borrow RM5 billion from the EPF to double the size of Valuecap to RM10 billion.

Established in 2003, Valuecap is a fund management firm created to invest specifically in the Malaysian equity market.

It is jointly owned by Khazanah Nasional Bhd, the government's investment arm, Permodalan Nasional Bhd and Retirement Fund (Incorporated).

Nor Mohamed said one of the reasons for the setting up of Valuecap was not to rely on indicators given by outsiders as many Malaysian companies, despite having strong fundamentals, were often in a uncertainty state.

He said domestic investors sometimes got carried away by indicators given by outsiders, thus affecting the local equities market.

“When foreign investors enter the market, they will go in and when the foreigners leave, they will also leave. The market players who make the most money are the foreigners,” he said.

Replying to Dr Puad Zakarshi (BN-Batu Pahat) on the criteria used by the EPF Investment Panel to evaluate a company, Nor Mohamed said the panel would benchmark a company’s capacity to repay loans, its project’s growth potential and the firm’s credible management to ensure the investment was safe and profitable.

“This clearly shows the EPF will approve loans or invest in only strong companies and not in weak ones,” he said.

Nor Mohamed said EPF investments were based on Strategic Asset Allocation Plan under which the quantum of investments for an asset class and regulations would be determined every year befitting the investment risk level.

The scope of investments include infrastructure projects such as telecommunications, energy, water and highways, he said.

The minister said EPF investments in equities was only 20%, which accounted for RM30 billion, while the remaining 80% are in financial market instruments, government securities, loans and in infrastructure projects.

They include telecommunications, energy, water, highways, transport and real estate," he added – The Malaysian Insider / Bernama.

The Minister of Finance is not to direct the EPF Investment Panel to lend or not to lend money to Valuecap for investment in the stock market. That decision to lend 5 billion to Valuecap should be left entirely to the EPF Investment Panel to make. Or if they wish to invest directly in the market themselves is for them to make.The Finance Minister could lend Government funds to Valuecap but not the EPF savings for Valuecap to make the money in the stock market. This is a very subtle point and it needs careful thought. My Journal strongly protests the directive and use of EPF Funds by the Minister of Finance.