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Undilah PAS : MENENTANG KEZALIMAN & MENEGAKKAN KEADILAN
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Despair about wild policy swings
Inconsistency makes investing impossible
by Meera Tharmaratnam
This article was published by the Singapore Business Times on 13 Oct 1999
HONG KONG - Foreign brokers and analysts virtually threw their hands up in
despair yesterday at the latest policy pronouncement by Malaysian Prime
Minister Mahathir Mohamad about his country�s bank merger process.
Brokers said it was unacceptable for the government to turn around and keep
on reversing public policy. Constant policy flip-flops made it hard for them
to advise their clients on stocks and harder still for them to interest
clients in investing in Malaysia ahead of the country�s reinstatement in the
benchmark MSCI index next year.
"We�ve been saying first it was going to be six, now it�s going to be more
but we�re not sure," said a UK-based broker. "Now Mahathir has changed tack
again. It�s a problem. What we tell our clients is academic. Clients aren�t
reacting. Trading in Malaysia is dead in the water."
Brokers and analysts were reacting to the Malaysian premier�s remarks
yesterday that the bank merger schedule was now flexible. Malaysia�s race to
create its super banks was not just about the Quek Leng Chans and Rashid
Hussains, brokers said.
Many investors, small and large, accepted the government�s list of winners
and losers at face value, and invested accordingly. Changing directions
does not only rob these investors of thousands of ringgit, but denies
long-term investors a stable investment platform, they said.
"My clients bought into RHB Capital. Why? It had a low P/E, it had a good
management team," said a broker.
"Suddenly, it�s decided they�re not an anchor bank. The stock�s price
collapses, my client takes huge losses. If selling right at the bottom isn�t
enough, then we have London where the prime minister comes out saying six is
an arbitrary number.
"The stock surges. Can my client sue? It just reinforces that whatever you
do, you�re at the whim of the Malaysian government."
Brokers and analysts said the current mess meant the only sure bets were
Malayan Banking, Commerce Asset Holding and Public Bank. Every other banking
stock could be considered a punt, and that hardly fits most blue-chip fund
managers� portfolio requirements.
That�s not even considering the merits of the controversial merger plan, as
it originally stood. As several regional analysts said, it made no sense why
Multi-Purpose Bank was taking over a banking group many times its size, or
why the Chinese community ended up with only one bank.
The fact that share prices of RHB Capital and AMMB fell to levels reflecting
their break-up values underscored the market�s belief that dramatic transfer
pricing would entirely favour the winners.
Changing the rules halfway so the merger process reflects a fairer
representation of interests doesn�t necessarily make things better. It
doesn�t build goodwill with investors if they feel they are continually
being short-changed, brokers said.
"I had a client from UK on the phone the other day. His remark was �This is
typical Malaysian government policy. It�s as clear as mud�," said a broker.
Other brokers remarked that given the vagaries of politics, Malaysia will
always trade at a discount to other markets in the region.
Fund managers will always think twice about investing in Malaysia if they
can get comparable returns in another Asian market, partly because it takes
so much effort to keep up with all the political shenanigans.
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