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©The Edge Daily (Used by permission)
by Surin Murugiah

KUALA LUMPUR: Second Finance Minister Tan Sri Nor Mohamed Yakcop yesterday removed some degree of ambiguity on the proposed RM5 billion loan that is being extended by the Employees Provident Fund (EPF) to Valuecap Sdn Bhd.

He clarified that the EPF would not take up an equity stake in Valuecap nor would the RM5 billion go to meet debt obligations to Valuecap shareholders.

However, there were no clear answers as to why the EPF was extending the loan to Valuecap. All Nor Mohamed offered was that the loan was good for EPF as it was guaranteed by the government.

“The EPF, or any other fund for that matter, can choose to either invest directly in the equity markets or extend loans. This (loan to Valuecap) is better for the EPF as it is guaranteed by the government,” he told reporters after a cheque presentation here.

Valuecap is an entity established by the Ministry of Finance (MoF) in 2003 to invest in undervalued stocks in the local bourse. Its initial capital of RM5 billion was injected by shareholders that comprise Khazanah Nasional Bhd, Permodalan Nasional Bhd and the Pensions Trust Fund Council.

Last month, Finance Minister Datuk Seri Najib Razak announced that Valuecap would receive an additional RM5 billion from the EPF, a move which sparked some criticism.

This came about after it was reported that Valuecap had a RM5 billion bond issued to shareholders that expires in February next year. The fear was that Valuecap would utilise the RM5 billion to meet the bond obligation.

To this, Nor Mohamed did not rule out the possibility of Valuecap’s shareholders extending the repayment period.

“They might give an extension,” he said.

Valuecap is styled after the Tracker Fund of Hong Kong that was launched during the Asian financial crisis in 1997-98. The fund, sponsored by the government, was a huge success as it was later sold with a handsome profit. In light of the current global financial crisis, similar funds were launched in Qatar and South Korea.

It has been reported that as of Dec 31, 2007, Valuecap had total assets of RM7.56 billion and had posted an after-tax profit of RM1.1 billion. As for returns to shareholders, it has been reported that from its inception to September 2007, Valuecap had paid out a total of RM135 million in dividends.

Based on industry information obtained by The Edge Financial Daily, Valuecap is believed to have about RM4.9 billion worth of investments in 70 companies currently.

The companies are from diverse segments and include YTL Group, IJM Group, Malayan Banking Bhd, Hong Leong Bank Bhd, Public Bank Bhd, Tenaga Nasional Bhd, Malaysian Oxygen Bhd, Amway (M) Holdings Bhd and PLUS Expressways Bhd. The list also shows that Valuecap has interest in Real Estate Investment Trusts (REITs) such as Axis REIT and Quill Capital Trust REIT.

Meanwhile, commenting on the stimulus package announced by Najib on Tuesday, Nor Mohamed said the measures were to help cushion the impact of the global financial crisis.

He said the US and other economies had so far pumped in an estimated US$2.5 trillion to save failing businesses, and to keep recession at bay.

“There is consensus that western countries could face recession, and Malaysia being fully integrated into the global financial system will feel the impact of the crisis affecting the West,” Nor Mohamed said.

However, he stressed that Malaysia was resilient and had adopted measures that would safeguard its economy, based on lessons learnt during the Asian financial crisis.

“We have adopted expansionary measures and the government will lead the way in spending. The RM7 billion (stimulus package) will be spent on areas where it is easier to disburse and create multiplier effects quickly,” he said.

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