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    Sep 15, 2015

    Najib announces $6.5b boost to stock market


    MALAYSIAN Prime Minister Najib Razak said yesterday that a government equity investment firm would be given RM20 billion (S$6.5 billion) to shore up the country's stock market, and announced other measures to support its slowing economy.

    Mr Najib, who is also finance minister, said at a news conference that the firm, ValueCap, will invest in undervalued Malaysian companies, Reuters reported. A total of RM20 billion would be allocated to "re-activate" the firm.

    In 2002, ValueCap was formed as an entity to support underperforming shares and had proven to be effective in stabilising the equity market.

    Mr Najib said ValueCap had generated high returns for its shareholders, including Khazanah Nasional, The Star reported.

    He said to stabilise the financial market, government-linked companies were encouraged to invest the profits they have made from their overseas investments into local projects which had high multiplier effects. "Malaysian private companies are encouraged to do the same."

    The Prime Minister also announced that the factory sector would be exempted from import duties until the economy recovers, but did not specify which sectors would be affected.

    But analysts said these levers were uninteresting, although the "market stabilisation" has been successful in the past, even in advanced capital markets such as Hong Kong.

    Finance executives also told The Straits Times that concern over Malaysia's economy was due to more than just external shocks - as repeatedly outlined by the Najib administration - such as the soaring US dollar and slowdown in China, a major trading partner.

    They said the concern was also fuelled by allegations against the Prime Minister regarding troubled state investor 1Malaysia Development Berhad (1MDB), whose advisory board is chaired by Mr Najib.

    He insisted again yesterday that the financial problems of 1MDB - which racked up RM42 billion in debt in just five years - would be resolved "in a transparent and market-friendly" manner, and that the government is committed to completing ongoing probes into the firm's business.

    Kenanga Investment economist Wan Suhaimi Saidie said: "But a lot needs to be done to nurture back confidence on corporate governance, especially if you have 1MDB unresolved."

    1MDB has denied accusations that billions were channelled out from the firm to unrelated parties instead of business partners. Mr Najib claimed that US$700 million (S$985 million) linked to the firm and deposited in his private accounts was not public money, but political funding from Middle Eastern donors.