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2008-10-24

Proof for RM5 billion will not go down the drain

Malaysia’s largest labour union and opposition leaders yesterday denounced government plans to inject RM5 billion into the stock market, saying they fear public funds could be misused to bail out ailing, well-connected companies.

The government earlier this week said it would double the size of state agency ValueCap Sdn Bhd to RM$10 billion to invest in stocks regarded as undervalued because many fundamentally strong companies were trading at low prices.

It has said the Employees Provident Fund (EPF) would provide a RM5 billion ringgit loan to Valuecap.

But the Malaysian Trades Union Congress, which represents some 500,000 workers, said the EPF is the custodian of people’s money and “not the ATM for the government” to bail out state-linked firms.

“This is the hard-earned money of the workers, their retirement plan. How is this bailout plan going to benefit the workers?” it said in a statement.

Opposition leader Datuk Seri Anwar Ibrahim said the additional money was merely 1 per cent of market equity and would have no impact on the bourse which has plunged by more than 37 per cent this year.

It “serves no logical purpose other than to prop up some companies in the stock market,” he told reporters in Parliament.

Lim Kit Siang, head of the opposition Democratic Action Party, said Valuecap has operated in secrecy since it was set up in 2003 and that its accounts have not been audited.

“This are the people’s money. In order to ensure that this is not a bailout...there should be a public scrutiny” of Valuecap’s accounts, he said.

The union and opposition leaders said there was no guarantee that the pension fund would profit from the loan to Valuecap given the weak market conditions.

“We want proof that this RM5 billion will not go down the drain,” the MTUC said.

The move to bolster the stock market was part of government measures to help improve sentiment and boost the economy amid the global financial downturn. The government has said it may have to cut its 5.4 per cent growth forecast for 2009

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Investment Idea

My investment with RM5,000 initial capital have been growing since 2005.I found the stock market appears confusing and complicated, but it is most definitely based on logic "supply and demand". However, the laws of supply and demand as observed in the markets do not behave as one would expect. To be an effective trader, there is a great need to understand how supply and demand can be interpreted under different market conditions and how to take advantage of this Off Market Transactions in KLSE.

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