Thursday, October 30, 2008

Going In Is Easy, Coming Out, How La?

What is the difference between what Valuecap is trying to do, with what the Federal Reserve is doing to save the collapsing banks?

The American bailout is simply injecting much-needed fresh capital directly into the banks and not buying shares in the open market. The Fed is getting new shares and existing shareholders are diluted. The share prices continue to be determined by market forces.

In contrast, Valuecap will be trying to boost stock prices by buying up shares from shareholders eager to get out of the market. Mmm, an exit plan for the shareholders. They will be laughing all the way to the bank and it will be double whammy, if the sellers remit the money overseas. Would this move shores up the market and maintain share prices above critical levels? You decide.

Then would we, the EPF contributors know whose shares were bought? The good and fundamentally strong counters or the buddies’ counters?

And how will Valuecap exit from its positions in the future? Any exit plan? It acts as saviour to the exiting shareholders but who is going to ‘save’ it?

In a further cloud of secrecy, there was news that 20 per cent of its RM330 billion funds has been invested in shares. However we do not know how much has been invested in loans for infrastructure projects with low or questionable returns? Think Bakun, Pelabuhan Tanjung Pelepas, Left Right Centre corridors! Etc.

Perhaps the RM5b would be much better used injected directly into the economy itself, via tax breaks for SME enterprises or short-term loans to help smooth over the rocky road ahead.

2 comments:

Kayage said...

There is wind blowing that V-Cap has an owing of about Rm5bil (due for repayment next year, i believe).. makes me wonder if the Rm7bil injection is to help V-Cap pay up the debt or for them to use it to buy undervalued shares..

Many speculates that it (the injection) will be utilised for the former.. there goes our duit rakyat sum-more.. **sigh**

CheeWee said...

i told u so.. the bond is expiring jan 09.. you decide what's the real intention. personally, i m withdrawing as much as i could fr EPF Ac 1 for unit trust investment & Ac 2 to reduce my housing loan. Ac 1 - confident that Public Mutual can give me more dividend over the long term. Ac 2 - no brainer - paying less interest to the banker.