Malaysia pension fund plans S$565m UK sale, heeding govt call to repatriate funds

DEC 30, 20158:29 AM

[KUALA LUMPUR] Malaysia's second-largest pension fund is planning a 270 million pounds (S$565.2 million) sale of an office building in central London, responding to a government call to repatriate funds to prop up the country's ailing stock and currency markets.

Kumpulan Wang Persaraan (Diperbadankan), which has about 120 billion ringgit (S$39.6 billion) of assets, is finalising an agreement to sell an office building at 88 Wood Street in the City of London that it bought in 2013 for 215 million pounds, according to the fund's chief executive officer Wan Kamaruzaman Wan Ahmad. As well as getting a higher sale price, the fund will benefit from the sharp rise in sterling against the ringgit over the past two years."We are selling the property because we stand to benefit from real estate and foreign-currency gains," Mr Wan Kamaruzaman said in an interview in Kuala Lumpur earlier this week. "It's also in line with the government call to repatriate gains back to invest in the domestic market." Malaysia's stock market and the ringgit have been hurt this year by investor worries about a political furore over Prime Minister Najib Razak's dealings with the state-owned 1Malaysia Development Bhd, and by concerns about the effect of higher US interest rates on Malaysia and other emerging markets.

In response, the government asked state organizations like KWAP in August to look for ways to sell overseas assets and repatriate the proceeds. Mr Najib said last month that government-linked companies plan to bring home assets worth a total 627 million ringgit during 2015.

KWAP, as the state-owned fund is known, expects to be able to repatriate the funds back to Malaysia by the end of the first quarter to invest in local markets, Mr Wan Kamaruzaman said. He didn't name the buyer of the London office building.

Malaysia's stock market may recover next year as a result of recent government measures, Mr Wan Kamaruzaman said. As well as repatriating funds from the UK, KWAP is contributing to a 20 billion ringgit capital injection into ValueCap Sdn, a fund- management company set up in 2002, which will be used to stabilize local markets. Other contributors to ValueCap are sovereign wealth fund Khazanah Nasional Bhd and state-owned investment fund Permodalan Nasional Bhd.

"Our market looks reasonably attractive in 2016 after two negative years," Mr Wan Kamaruzaman said. He said he expects ValueCap to become "a significant player in the local market as it supports undervalued shares." The benchmark FTSE Bursa Malaysia index has fallen 4.3 per cent so far this year after dropping 5.7 per cent in 2014. For foreign investors, the losses have been magnified by the 19 per cent plunge in the ringgit against the US dollar this year, making it the worst-performing currency in Asia in 2015.

Overseas investors have pulled 19.2 billion ringgit from local stocks so far this year, more than double the 6.9 billion ringgit of outflows for the whole of 2014.

Mr Wan Kamaruzaman said he thinks foreign investors will return to Malaysia next year because the market is cheap after the recent drop in the currency, which he said is also set for a rebound. The South-east Asian unit is trading in the 4.20 to 4.30 a US dollar range and, if market conditions improve, it could strengthen to 3.80 to the dollar next year, he said.

KWAP collects an average of about RM4 billion annually from its members in pension contributions, Wan Kamaruzaman said. It reported a gross investment income of RM6.47 billion in 2014, with the largest contribution coming from equities at 39 per cent of the total. Loans and private debt represented 23 per cent of income, while Malaysian government securities made up 17 per cent, according to information published on the fund's website.

The fund allocates 54 per cent of its funds to fixed income securities, 36 per cent to equities and the remaining 10 per cent to other investments including real estate. KWAP's overseas investments currently account for 15 per cent of its total assets, and it has a mandate to invest up to 19 per cent of the total abroad, Mr Wan Kamaruzaman said.

BLOOMBERG