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.