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Alias258
277 posts
Posted by Alias258 > 2013-09-02 20:09 | Report Abuse
Debt-laden Malaysian fund stirs controversy
SOMETIME in September 2009, currency traders at Bank Negara Malaysia were jolted by huge purchases of US dollars in the domestic currency market and quickly decided to halt the selling pressure on the local currency. They were promptly told to stand down by their superiors.
The buildup of US dollar positions on that day paved the way for state-owned 1 Malaysia Development Bhd (1MDB) to move US$1 billion out of the country for an investment in a British Virgin Islands entity.
“At the time, no one knew where the money was headed or why such a large amount was being taken out,” said one senior Kuala Lumpur-based currency trader familiar with the episode.
“It was a company we needed to watch, because it came out of nowhere and showed clout,” said another chief dealer at a foreign bank in Kuala Lumpur.
These days, 1MDB isn’t just raising eyebrows. The secretive investment arm of the government is sending shockwaves through international bond markets and raising concern at home with its aggressive borrowings, opaque financial manoeuvres and risky bets. It is also becoming a hot political potato for Prime Minister Datuk Seri Najib Razak’s administration.
Opposition politicians insist that 1MDB is part strategic investment arm and part political slush fund for the Najib government, because of its generous financial handouts to key constituencies of the ruling Barisan Nasional (National Front) coalition.
In just over four years, 1MDB has racked up borrowings of more than US$11.97 billion (RM38.4 billion), corporate documents and published accounts reviewed by The Edge Review show. This huge accumulation of debt is against a backdrop of paltry profits, derived largely from the shuffling of assets on its Cayman Island investment and the revaluation of PROPERTIES [] purchased at steep discounts from the government.
No Southeast Asian entity has accumulated so much debt in such a short time, and because the borrowings carry the implicit guarantee of the Malaysian government, bankers and economists say that 1MDB is emerging as a serious contingent liability for the Najib administration.
....read more here
http://www.theedgemalaysia.com/business-news/249300-highlight-special-report-debt-laden-malaysian-fund-stirs-controversy.html