Posted by Lam Kok Hoong > 2015-09-15 11:56 | Report Abuse

http://fortune-piggy.blogspot.my/2015/09/thought-of-day-rm20billion-200.html Thought of The Day - RM20Billion 浅谈 - 200亿 Yesterday, our prime minister announced that Government will pump in RM20billion (USD4.65bil) into share market through reactivation of ValueCap Sdn Bhd. Just to recap, ValueCap is a joint holding company held at equal share by 3 major GLC fund, namely Khazanah, KWP & Permodalan Nasional (each holding at 33.33%). Hence, each of the above will inject RM6.67bil each into ValueCap and to support the local market. According to PM, ValueCap is to buy into shares that are 'undervalue' from the market. I just think about the above and come out with some questions: 1. If the share price of a company is undervalued, why investor in the 1st place wanted to sell it and drag the price down futher? 2. If the share price is undervalued, why other investors not buying it but need the support from GLC fund? (I believe if the share price is really under valued, private equity fund manager or rich businessman will sure buy the share for investment or will privatized the company). Then I also see something not right for the action: 1. If GLC to inject RM20bil to support the market, so the share price will increase as a result of this RM20bil injection and then at the same time, foreign investor will take the opportunity to sell at a higher price. I believe foreign investors will be the 1 laugh till rolling on the ground. 2. Instead of injecting such a huge sum into share market, where only beneficial to those who trading shares and foreign investors only, why not government just use the money to start some ultilities or public civil projects such as constructing better road or better public transportation, or to buy out some highways so that we no longer need to pay toll. I believe this would be better the benefits are share by more people. I also refer to the similar action applied by China equity market, on 18 Aug, PBOC (China Central Bank) has injected USD$19bil into the equity market, but the sum was not able to hold the falling momentum and later on 25 Aug (a week after the 1st injection) PBOC again injecting USD$23.4bil into the share market. Later on 26 Aug, agin PBOC came out with new regulatory that allowed their pension fund to invest into equity which was forbidden before this and estimated USD$97bil is able to inject into the market. But all the above actions not able to prevent the Shanghai Composite Index from falling. So are the RM20bil injection able to sustain the KLCI?