Snapped up like Butter Cookies!

Business Times Singapore reported about the Amanah Saham Malaysia. It is a good write-up and so I am attaching this to my postings.

KUALA LUMPUR, July 23 — All 1.6 billion units in a state-sponsored unit trust offered for sale yesterday by Permodalan Nasional Bhd (PNB) were snapped up by risk-averse Malaysians looking for a safe return.

PNB is Malaysia's largest fund manager and, originally, had offered 3.33 billion units to all Malaysians on the basis of a race quota whereby 50 per cent would be allocated to Malays, 30 per cent to the Chinese, 5 per cent to the Indians, and the remainder to “other” races such as the Eurasians.

Only the Chinese took up their quota while both the Malays and the Indians were unable to do so. PNB then offered the remaining 1.6 billion units to all comers for seven days beginning on July 21 with the proviso that each applicant would only be entitled to a maximum of 20,000 units. Even so, they were snapped up within hours yesterday. The overwhelming demand for a “safe” return epitomises the growing risk-averse profile of Malaysian investors fearful of the uncertainty posed by the global financial crisis. It also illustrates the excess liquidity in the banking system and the relative propensity of Malaysians to save.

But the fact that the units were sold out only when they were offered to everyone irrespective of race could also trigger carping from Malay commentators about the relative prosperity of Malaysia's Chinese community vis-a-vis other Malaysians.

It's also easy to see the attraction of the units. PNB was set up in 1978 by third premier Tun Hussein Onn to boost Bumiputera — indigenes and largely Malays — participation in the economy. Towards that end, the corporation — fuelled by government funds — was allowed stakes in some of Malaysia's choicest companies courtesy of the New Economic Policy which, among other things, mandated that any company going for listing had to set aside 30 per cent of its equity towards Bumiputera interests.

By 1981, the corporation had grown sufficiently large to allow ordinary Malays to participate in its returns — it currently has significant interests in over 300 companies including some of the country's largest, such as Sime Darby, Maybank and United Motor Works.

Investors were offered participation through unit trusts which were then exclusive to Malays. The first two trusts were spectacularly successful, giving out annual returns of between 10 and 22 per cent.

In 2000, the first PNB trust open to non-Malays was launched and since then, every single one has been sold out completely.

My Comments:

Even so, ASM as a unit trust has also its down side. It is no bond and can slide down into negative territory just like the state Amanah Sahams. Even at the federal level,look at its sister funds for medical, education and pensions administered by PNB. Except for the pension fund which has lost 5 sen to 95 sen, the others are not doing well-mostly below 95 sen per unit. I do not know whether, enough dividends have been paid out to cover the current losses of these units.

Also, take note. Now that new listings do not need bumiputra institutions or partners, the chances of PNB having assured share allotment is no longer there.PNB will henceforth have to go into the open market to compete with individual bumiputras for a reduced cake of 50%.

The new circumstances will certainly make PNB to play on a more level playing field and they will now have to hire the best brains to help provide the strong dividend payout in an unknown market.

So we may yet see some restructuring of the staff profile of PNB as non Malays and foreigners are hired to "sniff out" good shares to buy and play the entry-exit game on the Bursa! Happy hunting, PNB!