Malaysia's largest pension fund said it was a net buyer of the nation's stocks during recent declines as foreign investors cut their holdings.

The Employees Provident Fund, which manages more than US$170 billion of assets, bought "good quality" and "fundamentally sound" shares, Mohamad Nasir Ab Latif, deputy chief executive officer of the fund, said in an e-mail interview yesterday. The FTSE Bursa Malaysia KLCI Index fell 6.8 per cent from its July 24 record through August 28 before rebounding 5.1 per cent.

"Being the biggest investor in Malaysia, we view any market extremes as opportunity for us to rebalance our portfolio for continuous return and risk diversification," Kuala Lumpur-based Mohamad Nasir said. "We believe Malaysia is in a stronger footing forward and we expect investors' interest to come back to this region, especially the emerging countries."

Malaysia's second-biggest pension fund Kumpulan Wang Persaraan (Diperbadankan), Thailand's Government Pension Fund and Indonesia's state retirement scheme PT Jamsostek have also said they bought local equities during the recent regional market rout, triggered by concerns over the US potentially tapering its monetary stimulus. The four Southeast Asian funds manage a combined US$229 billion of assets.

The KLCI index traded for 14.9 times earnings estimates for the next 12 months on August 28, the lowest level since April, and was valued at 16.7 times yesterday, data compiled by Bloomberg show. Foreigners sold RM6.8 billion of Malaysian stocks in August, exchange data showed.

The MSCI Southeast Asia Index has dropped 15 per cent since May 22, when the US Federal Reserve signaled its asset-buying programme could be trimmed if the US economy showed a sustained recovery. Global funds pulled about US$44 billion from emerging- market stock and bond funds since the end of May, EPFR Global, which tracks fund flows, said August 23.

The Malaysian pension fund, known as EPF, is looking at real estate opportunities in Europe and the US to diversify risk, Mohamad Nasir said. The fund currently has about 1.5 per cent of its total assets in global properties, which are mainly in the UK and Australia, and this will naturally increase as the fund size grows, he said.

The fund also plans to raise its overseas investments to 23 per cent from 20 per cent to widen its earnings base, he said. EPF will continue to expand its international mandates which cover both bonds and stocks in Asia as long as they meet certain investment criteria, Mohamad Nasir said.-- Bloomberg