Government seen to cut stakes in GLCs

From The Business Times:

KUALA LUMPUR: Khazanah Nasional Bhd is expected to gradually reduce its large stakes in government-linked companies (GLCs) after disposing of 5% of Malaysia Airports Holdings Bhd (MAHB) last week.

Analysts said this long-overdue development bodes well for the Malaysian equity market as it would enhance the participation of foreign institutional investors.

They said the Malaysian government investment arm could afford to reduce its shareholdings while still retaining strategic stakes in the GLCs.

Already Permodalan Nasional Bhd and the Employees Provident Fund, which are viewed as friendly parties to Khazanah, hold huge chunks in the GLCs.

CIMB Investment Bank Bhd last Friday confirmed a report in The Edge Financial Daily that it had placed out 55 million shares, representing a 5% stake in MAHB, to institutional investors at RM3.30 apiece the day before.

The bank said the transaction price was a tight discount of 2.37% to the closing price last Wednesday. The off-market deals reduced Khazanah’s stake in MAHB from 72.7% to 67.7%.

The Edge Financial Daily report also noted that the transactions would be the start of a government paring down programme to attract foreign participation into the local market.

Following the report last Friday, POS MALAYSIA BHD [] saw a total of 25 million shares transacted in off-market deals at an average price of RM2.30 apiece. However, no buyer and seller details were known.

According to Khazanah Nasional’s investment holdings structure, it owns 32.21% of Pos Malaysia.

I'm not surprised that the government is reducing its stakes in GLCs. I mentioned that the Najib government will probably be pro-investment bank oriented. It's important to understand that this may or may not benefit the economy, but a liberalization of the financial sector is considered a general positive for the stock market.

Also the fact that the Prime Minister's brother, the head of CIMB, will probably benefit the most from these initiatives spells vested interest in Najib to pass more investment bank friendly policies and deals.