Malaysia to pump $4.6 billion into stock market in emergency measure

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Najib-Razak gestureMalaysian Prime Minister Najib Razak said on September 14 an idling government equity investment firm would be reactivated and given 20 billion ringgit ($4.6 billion) to shore up the country’s stock market, amid other measures to support the country’s slowing economy and tumbling currency, amid allegations of corruption against his administration and related street protests.

The respective firm is the government investment arm ValueCap, created in 2002 to “support underperforming shares” of listed companies that continued suffering from the effects of the Asian Financial Crisis in 1998, but was more or less defunct as of late.

Razak, who is also Malaysia’s Finance Minister, said he was confident that the injected cash could “provide a lifeline to the financial market.”

Among ValueCap’s shareholders are key state investment fund Permodalan Nasional Berhad, state-owned Employees Pension Fund (EPF) and Khazanah Nasional Berhad, which Razak said had profited much from ValueCap’s set-up then.

valuecapValueCap, however, was mired in controversy during the Mahathir administration and faced allegations that the fund was meant to be used as a vehicle to bail out underperforming companies seen close to the ruling coalition. The then government denied the allegation, insisting that the investment fund was established to help nudge capable but undervalued companies.

Furthermore, Razak announced that the factory sector would be exempted from import duties until the economy recovers, but did not specify which sectors the exemption would apply to. To strengthen small and medium enterprises, he said an additional $464 million would be given for the Working Capital Guarantee scheme.

Another measure is that government-linked companies have been urged to invest domestically instead of abroad. Razak also reiterated the government did not have plans to impose capital controls.

He said the government’s  Special Economic Committee will continue to monitor the situation and provide short- and long-term policies to tackle any economic downturn periodically.

The Malaysian ringgit currently stands at around 1998 lows, falling beyond 4.31 ringgit to the US dollar in September 14 trading, compared to 3.22 one year ago.

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Malaysian Prime Minister Najib Razak said on September 14 an idling government equity investment firm would be reactivated and given 20 billion ringgit ($4.6 billion) to shore up the country's stock market, amid other measures to support the country's slowing economy and tumbling currency, amid allegations of corruption against his administration and related street protests. The respective firm is the government investment arm ValueCap, created in 2002 to "support underperforming shares" of listed companies that continued suffering from the effects of the Asian Financial Crisis in 1998, but was more or less defunct as of late. Razak, who is also...

Reading Time: 2 minutes

Najib-Razak gestureMalaysian Prime Minister Najib Razak said on September 14 an idling government equity investment firm would be reactivated and given 20 billion ringgit ($4.6 billion) to shore up the country’s stock market, amid other measures to support the country’s slowing economy and tumbling currency, amid allegations of corruption against his administration and related street protests.

The respective firm is the government investment arm ValueCap, created in 2002 to “support underperforming shares” of listed companies that continued suffering from the effects of the Asian Financial Crisis in 1998, but was more or less defunct as of late.

Razak, who is also Malaysia’s Finance Minister, said he was confident that the injected cash could “provide a lifeline to the financial market.”

Among ValueCap’s shareholders are key state investment fund Permodalan Nasional Berhad, state-owned Employees Pension Fund (EPF) and Khazanah Nasional Berhad, which Razak said had profited much from ValueCap’s set-up then.

valuecapValueCap, however, was mired in controversy during the Mahathir administration and faced allegations that the fund was meant to be used as a vehicle to bail out underperforming companies seen close to the ruling coalition. The then government denied the allegation, insisting that the investment fund was established to help nudge capable but undervalued companies.

Furthermore, Razak announced that the factory sector would be exempted from import duties until the economy recovers, but did not specify which sectors the exemption would apply to. To strengthen small and medium enterprises, he said an additional $464 million would be given for the Working Capital Guarantee scheme.

Another measure is that government-linked companies have been urged to invest domestically instead of abroad. Razak also reiterated the government did not have plans to impose capital controls.

He said the government’s  Special Economic Committee will continue to monitor the situation and provide short- and long-term policies to tackle any economic downturn periodically.

The Malaysian ringgit currently stands at around 1998 lows, falling beyond 4.31 ringgit to the US dollar in September 14 trading, compared to 3.22 one year ago.

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