Calpers lists KL as investable markets
Calpers lists KL as investable markets
Bloomberg, Kuala Lumpur
The California Public Employees' Retirement System, the biggest
U.S. pension fund, reinstated Malaysia to the list of markets in
which it may invest, a move that may encourage other overseas
investment in the country and the region.
Calpers, as the fund is known, added Malaysia to the list
after a two-year hiatus on the advice of Wilshire Associates
Inc., spokesman Brad Pacheco said in a statement on Calpers' Web
site. The fund cited improved political stability, financial
transparency, labor standards and market liquidity.
The upgrade comes three months after the appointment of
Prime Minister Abdullah Ahmad Badawi, who has shunned the large-
scale building projects of his predecessor Mahathir Mohamad, and
promised to reduce corruption. It may boost investors' interest
in stocks such as Malayan Banking Bhd., Telekom Malaysia Bhd. and
Tenaga Nasional Bhd., said investors, including Michael Marusiak.
"It's yet another sign that things are getting better in
Malaysia," said Marusiak, who helps manage US$650 million in Asia,
excluding Japan, for Singapore-based Principal Global Investors.
"It's a sign of better corporate governance and transparency,
and less reliance on large projects to generate growth."
Marusiak expects large capitalized stocks such as Malayan
Banking Bhd., Telekom Malaysia Bhd. and Tenaga Nasional Bhd. will
be direct beneficiaries of the move by Calpers.
The broader market may gain as well. Malaysia's key Kuala
Lumpur Composite Index, up a third in a year, has nevertheless
lagged benchmarks in neighboring markets. Singapore's Straits
Times Index is up 44 percent, while Thailand's SET Index has
almost doubled in the past 12 months.
Calpers, with US$167 billion of investments, halted investment
in Thailand, Indonesia and Malaysia in February 2002, citing a
lack of transparency, political instability and poor labor
standards.
The move comes at a time when Malaysia's credit ratings are
rising, economic expansion in the $93 billion economy
accelerates, and earnings at some of its biggest companies
improve.
Investors have also praised a smooth transition of power for
Prime Minister Abdullah Ahmad Badawi, who has embarked on a
campaign to reduce corruption. Investors say the move reflects
recent reforms by the country to attract investment.
"Malaysia was moved into the investable universe because it
made improvements," Pacheco said in the Calpers statement.
Bond investors too have shown increasing confidence in the
country, willing to accept less yield to buy Malaysian debt in
the past year.
The government's 7.5 percent dollar-denominated bonds
maturing in July 2011 were bid at a yield of about 83 basis
points more than like-maturity U.S. Treasuries as of 9:39 a.m. in
Hong Kong, according to Deutsche Bank AG prices. A basis point is
0.01 percentage point.
The yield premium narrowed from about 1.74 percentage points
in March, Bloomberg data show.
Overall, the Calpers move "is good" for Malaysia, said Tan
Jin Teik, who as the chief executive officer of Avenue Asset
Management in Kuala Lumpur, helps manages the equivalent of $395
million in stocks and bonds.
Calpers has as much as $2.6 billion invested in the region.
Pacheco declined to provide details of the value of its planned
investment in Malaysia, saying in a telephone interview that
there wasn't a "target allocation" for individual countries.
Yesterday, Calpers said it would wait to sell about $67
million of its holdings in the Philippines pending a review by
Wilshire of the government's plans to improve corporate
governance and overall stability in the country.
The fund also gave Argentina, Peru and Turkey a year to
improve, while regional markets like Thailand, Sri Lanka, India
and China continue to be excluded from its "permissible markets
list".