Value Cap
The recent plunge had caused the government to put lots of
effort to stabilise the market where Valuecap is 1 of the most eye catching measure
where our PM announced reactivating Valuecap by pumping in RM20b which is the
highest amount ever.
Commencement in 2002
Valuecap were 1st
announced in October 2002 where it was after the 911 of 2001, and in the middle
of SARs as well as before the war in IRAQ which started on 20th
March.
Government set up Valuecap at that time where the capital will be RM10b
which is from 3 of its shareholder Khazanah, PNB and KWAP.
In year 2003, Valuecap had
raise RM5.1b through issuing bond. Money raise were injected into the market.
Though government had announced RM10b, however the fund end up using only
RM5.1b to stabilise the market.
Source: Value Cap annual report for year 2003
From the data above, we can see that the money of Valuecap
doesn’t come in a shot, but it is divided to a few shot. Where the Valuecap got
RM2.4b on 28th Ferbruary, RM1.8b on 21 March and another RM0.9b on 5th
September. We believe they can only go into share market after they got the money
from RUB.
The situation before the Value Cap
The market drop 24.63%
from the highest at 816 points on 23/4/2002 to the lowest on 614 on 4/12/2002.
Another bottom at 615.77 on 11/3/2013 after the announcement of ValueCap
(couldn’t retrace whether when did they announce it)
After Valuecap was
announced
The index rose from the lowest of 615 on 11/3/2003 to:
1.
2nd January 2004 which rose to 793 (178p
@ 28.94%)
2.
3rd January 2005 which rose to 907
(292p @ 47.47%) @2004 (114p @ 47.47%)
Summary: The government had successfully support the market in
year 2003 by using Valuecap which spent only RM5.1b which is smaller than what
they budget.
The second appearance of Valuecap
In December 2007 where the Subrime loan Crisis from US
happen while the collapse of Lehman Brothers on 15th September had causes the
market in great fear. The market had collapse where it started to fall on its
historical high of 1513 to the lowest by 801 which had dropped 712 points or
47.05%.
In year 20th October 2008, Deputy Prime
Minister and Finance Minister Datuk Seri Najib Razak announced that the
government would inject RM5 billion
from the Employees Provident Fund (EPF) to double the size of the
highly-secretive government fund, ValueCap Sdn Bhd to RM10 billion to prop up
the stock market.
However, in year 2008’s Annual report it shows that the
ValueCap had only got RM1b from EPF.
Above is the terms of the term loan.
The remaining amount of funds were received on the date
above. we believe they can only go into share market after they got the money from EPF.
In year 20th October 2008, DPM Najib announced to
pump RM5b from EPF to Valuecap, however, ValueCap only got RM1b in year 2008.
Though they haven’t use the fund, but the index had started to sideway after
then.
It is worth noticing that the FED had also announce QE on Dec
2008 which we believe that is also 1 of the reason that helps to support the market
to come back from falling.
On the other hand, BNM is also slashing interest rate at that
time where it had slashed 1.5% within 3 months frame which is a very drastic measure.
The thick red line were the date that Valuecap get funds from
EPF, we can see that the market didn’t rise even Valuecap get the funds
however, the market had stop dropping after Valuecap cames in which we believe
this is an important factor that buoyed the index.
The result of Valuecap on 2009
In year 2009, Valuecap got another RM4b from EPF where the
market had rose
1.
20th October 2009 which rose to 1270
(469p @ 58.55%)
2.
20th October 2010 the index hit 1480 (679p
@ 84.77%) from 1270 (210p @ 16.53%)
Summary: Though the government had launched the Valuecap to
support the market, however the return of the market was not solely due to
Valuecap but it was result from the combination of Monetary Easing measurement
of BNM as well as Quantitative Easing from US.
2014 Return of the king…
In year 2014, the index had hit a fresh high of 1896 on 8th
July and started to fall where the index had hit 1503 by 25th August
2015 where the index had dropped 393 points @ 20.72%. At the same time, Ringgit
had depreciate from RM3.20 to RM4.40 on 1st October 2015.
As
a result, PM had announced to reactivate Valuecap by injecting RM20b into the
fund on 14th Sept 2015.
As a result of index and Ringgit dropping, PM cum Finance
minister had announced market supporting measurement where they reactivate Valuecap
by pumping RM20b for Valuecap to invest in undervalue asset and this amount of
money will not affect the balance sheet of the government. Though we have had
Valuecap but we still have yet to see BNM come out with any monetary easing
measurement to cooperate with the government.
Excutive Summary comparison
we have sum up all the details of the previous years to make a comparison of the differences.
Year
|
2003
|
2008
|
2015
|
Highest
Peak
|
816
|
1513
|
1896
|
Date
|
23/4/2002
|
11/1/2008
|
8/7/2014
|
Low
|
615
|
801
|
1503
|
Date
|
11/3/2003
|
28/10/2008
|
25/8/2015
|
Drop
|
201
|
712
|
393
|
Drop (%)
|
24.63
|
47.05%
|
20.72%
|
Reason
of falling
|
911, SARS and the pre Iraq war
|
US Subprime loan & Lehman brothers
collapse
|
Slow growth China &EM, Fall of
commodities price and US tightening
|
Announced
Valuecap
|
1/1/2003
|
20/10/2008
|
14/9/2015
|
Amount
announced
|
RM9 b
|
RM5 b
|
RM20 b
|
Funds
Injected
|
RM5.1 b
|
RM5 b
|
unknown
|
Other
internal Policies
|
Interest slashed from 3.25% to 2.0%
|
Interest remain
|
|
Foreign
Policies
|
911, SARS and the pre Iraq war
|
US QE 1
|
US about
interest hike (tightening)
|
Date
|
Year2001 to 2003
|
Dec 2008
|
|
Result
after 1 year
|
793
|
1270
|
|
Rose (%)
|
178 (28.94%)
|
469 (58.55%)
|
|
Result
after 2 years
|
907
|
1480
|
|
Rose (%)
|
292 (47.47%)
|
679 (84.77%)
|
|
Comparison with DJIA
|
|||
Date
|
19/09/2002
|
11/1/2008
|
19/5/2015
|
DJIA
|
10673
|
12851
|
18351
|
Announced
Valuecap
|
1/1/2003
|
20/10/2008
|
24/8/2015
|
8342
|
8852
|
15370
|
|
Drop (%)
|
2331 (27.94%)
|
3999 (31.11%)
|
2981（16.24%）
|
Result
after 1 year
|
10527
|
10098
|
|
Rose (%)
|
2185 (26.19%)
|
1246 (14.08%)
|
|
Result
after 2 years
|
10729
|
11152
|
|
Rose (%)
|
2387 (28.61%)
|
2300 (25.98%)
|
After doing some comparison, we found that the government introduced
Valuecap in 2002 after the stock market dropping 24.63% while they had used
RM5.1b instead of RM10b which they announced earlier. In 2008, the stock market
had tumbled 47.05% before the government announced pumping RM5b into the
Valuecap. However, in 2015 the government had announced reactivation of
Valuecap with RM20b after the market drop 20.72%, where the amount this time is
much larger than the previous and they roll out this measure even the market is
still dropping lesser than the previous one.
Other than comparing the percentage of dropping for
Malaysia, we can also take DJIA as comparison where DJIA had dropped 27.94% and
31.11% in the past while this time they were only dropping 16.24% which is
still below 20% and hasn’t enter the bear market yet. This shows that the
government had roll out this measurement pretty early.
On the other hand, we can also noticed that Valuecap doesn’t
pump money into the share market by 1 shot but they are divided to a few
bullets. However, Valuecap doesn’t help to push up the market once they pump
the money in but they do able to stabilise the market from dropping.
This is proven in the news “State-owned investor ValueCap Sdn
Bhd is expected to start a mopping up spree of underperforming stocks on Bursa
Malaysia from November, when its shareholders release the first tranche of its
announced RM20 billion fund.
ValueCap’s three shareholders — Khazanah Nasional Bhd,
Retirement Fund Inc (KWAP) and Permodalan Nasional Bhd (PNB) — are expected to
make available RM8 billion as part of the initiative to strengthen the economy
that was announced by the prime minister last month.
KWAP CEO Wan Kamaruzaman Wan Ahmad said the three shareholders
will each provide an equal RM6.67 billion to ValueCap’s kitty.
“We were given an aggressive deadline of Oct 15 (to start), but
we think it will be difficult due to regulatory steps and approvals as well as
the nod from each shareholder’s board.
“We estimate ValueCap to commence with funds available somewhere
in the second-half of November,” he told The Malaysian Reserve at the sidelines of the Khazanah
Megatrends Forum 2015 yesterday.”
Source: http://themalaysianreserve.com/new/story/valuecap-share-buy-%E2%80%98spree%E2%80%99-starts-november
Can Valuecap succeed?
From the information above, we can see that the Valuecap
came out for the 1st time when George Bush started to query Iraq
regarding the massive destructive weapon and followed by Iraq war and SARS
which had affected the share market. However, the market had started to come
back after the commencement of Iraq war on June 2003 where DJIA had also rose
by 26.19% in 1 year time. Hence the rose of FBMKLCI was contributed by 3
things, 1st is the Valuecap, 2nd is the commencement of
war which had removed the uncertainties and the 3rd is the comeback
of DJIA. These 3 major factor was the most significant reason that causes the
market to regains its pace.
The 2nd time is in 2008 which were caused by Subprime
loan Crisis as well as the collapse of Lehman brothers that resulted in
financial market turmoil. Our Government had rolled out RM5b for Valuecap while
BNM came out with Monetary easing measurement by slashing interest rate from
3.5% to 2% as well as Quantitative Easing (QE) by FEDs which had causes the US
market to regain its pace. These 4 issues were the main reason that causes our
share market to comeback.
In 2015 which is the 3rd time, our country had faces a drop in income due to the low
commodities price, the slowdown of china and the uncertainty from Europe, US
tightening their monetary policy by rising interest as well as the fall of EM currency.
Our government are smart enough as they are aware of the severity of these
issue hence they had come out with RM20b to reactivate Valuecap.
However, we don’t
have other factors that help us to buoy the market other than Valuecap, it will
be an uphill battle for Valuecap as long as the issue that bothering us which
we mentioned above still remain the same.
It will only be easier if BNM ease their monetary policy,
commodities price able to rise again, China able to avoid hard landing as well
as the DJIA able to make new high again, or else, it is not an easy job to
Valuecap.
So how shall we benefit from it?
Last but not least, as Valuecap is coming back to save the
market we can still look for some “undervalue counters” such as FGV (don’t
think undervalue but its cronies counters), MHB (don’t think undervalue but its
cronies counters) to make some quick bucks once Valuecap came in. On the other
hand, those really undervalue counters that I think might spark the attention
of the Fund managers might be Padini and Tunepro which is consider cheap now.
In short, My top pick now is FGV, MHB, Padini and Tunepro
which might be favourable to benefit on the Valuecap move. Btw, u may look
forward for my next post about Leesk which doesn’t drop much even their profit
fall in the past quarter, this might be a hidden gem that waiting to explode
soon.
1 comment:
Will the government inject 20 billions in the coming share market?I doubt about it.Cos they are great kaki bohong.I just pray ppl like us wont get 'wounded"
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