U.S. pensions giant Calper exits four ASEAN markets

U.S. pensions giant Calper exits four ASEAN markets

Reuter, Singapore/San Francisco

The largest U.S. pension fund Calpers will sell its assets in
Thailand, Indonesia, the Philippines and Malaysia because those
countries failed new investing criteria including human rights
and labor practices.

The move pushed Thai shares and the baht lower and helped send
Malaysian shares down on Thursday despite a strong Wednesday
rally in U.S. shares. Thailand's finance minister defended his
country's human rights record and said other foreign funds were
likely to stay.

Analysts played down the longer-term significance of the move
by the California Public Employees' Retirement System, which
manages around US$151 billion in assets, noting the fund's equity
investments in the region were relatively small. But they said
the impact would be deeper if other U.S. pension funds begin to
follow suit.

"While this may not be a precedent, it may get other people
thinking that way," said Mark Matthews, chief strategist for
Asia-Pacific at Standard & Poor's in Singapore.

Analysts hesitated to estimate how much U.S. public pension
funds hold in Asian assets, but a March 2001 report in a U.S.
pension journal said the 1,000 largest U.S. pension funds had $5
trillion in total assets. If just one percent of this total was
invested in Asian assets that would be $50 billion.

"From the perspective of the Southeast Asian markets, the main
implication (of the move) is that because Calpers is such a large
fund, people do watch what they do. Their absence from these
markets does raise the cost of capital," said Christopher Gee,
head of equity strategy at ING Barings in Singapore.

Calpers said the move to adopt the new measures that examined
social issues such as human rights, transparency, political
stability and labor laws in addition to the usual financial ones
affected around $1 billion in emerging market holdings.

Analysts estimated Calpers had around $80 million invested in
Malaysian, Indonesian, Thai and Philippine stocks, judging from
the S&P IFCI Index which is a widely-used benchmark for emerging
market investors. This would be a drop in the combined market
capitalization of these markets of around $194 billion.

The Thai government immediately jumped into the fray, with
Finance Minister Somkid Jatusripitak saying Calpers' decision was
unlikely to lead to an exodus of foreign investors.

Indeed, Calpers committed $75 million to the government-backed
Thailand Equity Fund in late October. The fate of that investment
was unclear, as was whether Calpers was invested in fixed income
or private equity in Southeast Asia.

Some analysts speculated the fund would have a presence in
these markets because pension funds usually hold a diverse number
of financial instruments, especially fixed income which are seen
as less risky than equities.

Some players in the market were puzzled by Calper's decision
because it lumped four different Southeast Asian countries
together and went against the current market trend of boosting
allocations to these markets.

"Indonesia, the Philippines, Malaysia and Thailand have been
the best performers in Asia," said Mansoor Mohi-uddin, currency
strategist at UBS Warburg in Singapore.

According to figures from Nomura Securities, foreign investors
have bought 6.8 billion baht ($155 million) in Thai stocks, 445
billion rupiah ($43.7 million) in Indonesian shares and 2.3
billion pesos ($44.8 million) of Philippine equities for the year
to February 15. There was no data on foreign investors' purchases
of Malaysian shares.

Calpers dropped the Philippines because of financial
considerations it said, while Malaysia and Indonesia did poorly
on the human rights front. Thailand received a mixed score, but
still failed to make the cut.