AS1M-Flogging a Dead Horse

When something fails, there will be many theories flying around trying to put the finger on the causes and factors for it. And so today in the Malaysian Insider online newspaper, we have a take from Lee Wei Lian. The notations within parentheses are mine.]

"The undersubscription of the RM10 billion government-backed Amanah Saham 1Malaysia unit trust fund is likely due to the sheer volume of units available and wariness among some investors, according to analysts.

Only about a third of the fund has been subscribed so far and Permodalan Nasional Bhd (PNB), which manages the fund, has said that it will extend the subscription deadline for a third time since its launch in July.

This is in sharp contrast to PNB’s earlier funds such as Amanah Saham Malaysia and Amanah Saham Wawasan 2020, whose new units sold out quickly this year due to their track record of providing between six and eight per cent in returns.

Amanah Saham 1 Malaysia (AS1M) is PNB’s largest ever fund offering and getting the investing public to absorb all ten billion units would be more difficult than earlier funds, said market analysts canvassed by The Malaysian Insider.

Amanah Saham Malaysia, for example, was launched in 2000 with fewer than two billion units.

Investments in AS1M are also not capital guaranteed which affects its appeal.

Added to this is a perception among many investors that the size of the RM10 billion fund and its launch in the middle of the economic slowdown meant that the government is facing financial difficulties.

An analyst said that other investors might have held back as they were wary over what investments would be made with the AS1M fund because the information would only be disclosed in the annual report.

According to a recent news report, 85 per cent of the Chinese quota and 21 per cent of the Indian quota has been taken up.[This is good! What about the bumi portion?]

As 30 per cent of AS1M is set aside for Chinese investors and 15 per cent for Indian investors, and with only about 3 billion of the 10 billion available units taken up, this means an overwhelming portion of the unsubscribed units are those reserved for bumiputeras.

The low take up among bumiputeras could be due to a lack of familiarity with AS1M as it has to compete with other established PNB funds for attention.

One Malay investor in previous PNB funds such as Amanah Saham Bumiputera (ASB) and Amanah Saham Didik told The Malaysian Insider that there is some sceptism over AS1M.

“Funds such as ASB have been around a long time and people know what to expect,” she said. “People have other options. AS1M will have to differentiate itself.”

PNB has said it will have road shows nationwide to promote the AS1M starting with Perak and Sarawak in January followed by Sabah, Terengganu, Pahang and Melaka.

My Take:

The fund was way too large.

There was subscriber fatigue as the earlier Malaysian Bond and sukuk funds have taken out most of the available liquidity.

Also there was so much confusion on many issues. AS1M was perceived to be an inferior fund. There was that issue of costs which must be shouldered by unit-holders if they should sell off their units. PNB has been slow to allay all these fears.

Compared to the Malaysian Bond and sukuk funds,managed by Bank Negara, which guarantee a return of 5% whereby interest/dividend is paid quarterly, AS1M benchmarks itself to a miserly 3.75% rate of Malaysian Treasury Bond which was hardly appetizing enough to lure investors.

In parting, AS1M is a mockery to PM Najib's 1Malaysia concept. PNB should have thought through about the possible downside as perceived by the Malaysian citizens before convincing the PM to launch it. As usual, there is something wrong in PNB. What can you say about PNB after this failure. Will heads roll?

No, not in Bolehland Malaysia!