KUALA LUMPUR (Aug 6): With the new leadership at Khazanah Nasional Bhd taking shape, investors and market watchers await clarity on the sovereign wealth fund’s future direction.
Foreign investors are expected to hold on to their shares in strategic assets parked under Khazanah until the government provides a clearer vision of its objectives under the new stewardship of Datuk Shahril Ridza Ridzuan (pictured), according to Areca Capital Sdn Bhd. Currently, foreign shareholders hold sizeable stakes in companies under Khazanah’s equity portfolio, including Tenaga Nasional Bhd, Axiata Group Bhd and Malaysia Airports Holdings Bhd.
“For long-term investors, they are seen to hold on to what they have unless there is a clear change in policy that would warrant them to make adjustments to their holdings,” Areca Capital chief executive officer (CEO) Danny Wong Teck Meng told The Edge Financial Daily in a brief telephone conversation last week.
Last Friday, Khazanah announced the appointment of Shahril as its fourth managing director (MD), replacing Tan Sri Azman Mokhtar, after the Khazanah board resigned en masse “to facilitate a smooth and orderly transition under the new government.” This followed Prime Minister Tun Dr Mahathir Mohamad’s comment in early July that Khazanah had deviated from its original objectives of helping bumiputeras. Effective Aug 20, Shahril will helm the RM157.2 billion sovereign wealth fund, leaving the Employees Provident Fund (EPF) where he helped manage assets worth RM814.38 billion as its CEO. The EPF is also a dominant player in the domestic market as it has investments in more than 30 companies listed on the Main Market of Bursa Malaysia.
On the recent shake-up in Khazanah, Wong said: “Fund managers will always assess their risk-adverse position, and determine whether or not they want to be on the sidelines for now.” Former Khazanah MD Tan Sri Mohd Sheriff Mohd Kassim said Shahril’s appointment affirms the government’s commitment to continue the fund’s original mandate to benefit all Malaysians. “The first priority is to get the government to reaffirm that the original mandate of Khazanah’s role as a national wealth fund still stands,” said Mohd Sheriff, who headed the sovereign wealth fund from 1994 to 2003. At the same time, he said, Khazanah should take the initiative to downsize its participation in the domestic economy as “with a smaller public sector, private business has more room to grow”.
Similarly, MIDF Amanah Investment Bank Bhd said Shahril’s entry into Khazanah would pave the way for the sovereign wealth fund to restructure its strategic national assets in line with the new government’s vision. “Together with the presence of [Dr] Mahathir and Azmin (Economic Affairs Minister Datuk Seri Mohamed Azmin Ali) on board, Shahril will be guided to drive Khazanah to meet the government’s strategic and economic objectives,” said MIDF head of research Mohd Redza Abdul Rahman. As for the new Khazanah board members, Mohd Redza said it underscored the government’s focus on better corporate governance in Khazanah and its key investee companies.
Economist Tan Sri Ramon Navaratnam expects Shahril to continue exercising prudence and caution in managing public funds, particularly in relation to investment risk. “Sometimes when you have so much money at your disposal, you are inclined to increase the returns and therefore get involved in higher-risk investments, which could have great dangers.”
Dr Mahathir has been appointed Khazanah chairman, with former president and CEO of Petroliam Nasioal Bhd Tan Sri Mohd Hassan Marican, former Bank Negara Malaysia deputy governor Dr Sukhdave Singh, and former Securities Commission Malaysia executive director of market development Goh Ching Yin also on the board of directors.
This article first appeared in The Edge Financial Daily, on Aug 6, 2018.