Stupid or something fishy?
That was the comment on the Facebook Group Citizen Voice to this blog's yesterday posting, Why would EPF be selling out Top Glove?
Zam Yahya's comment to question the dividend announced for 2020 remained on the back of many astute professional investors and market traders.
The fact that almost 40% of the portfolio is stuck in equity for salvaging the crashing market from loss in investors confidence after GE15, the balance 60% in cash, money market and bonds need to make up for the substantial shortfall from equity return throughout 2018, 2019 and 2020.
That portfolio cannot make up for the poor dividend and capital loss. Zam Yahya fairly estimate should be about 4%. EPF under former CEO Tengku Alzakri Alias may have found some innovative ways to generate return from the equity portion to get 4.9 to 5.2%.
One possibility is to do shares lending for foreign investors to short the market. That would have detrimental effect on the Malaysian equity market.
The Top Glove transaction given hint to such possibility. It was shorted down and caused the shares to slide from third quarter last year. Foreigners were reportedly actively doing shorting and later covering the shorts.
They have been active throughout 2018 to bash down across the equity market and also other financial markets such as currency, commodity and bonds. Recalling back those dreadful days, foreign investors were aggressively shorting whenever there is volume and challenging new support.
They were avenging the missed opportunity of 1997, in which Malaysia instituted CLOB, Selective Capital Control and tighten banking regulations to stem the speculators.
Back then, a Malaysian got wind of the plan because they wanted to rope him in but his strong sense of nationalism within this non-Malay investor discouraged him from participating. "I will make money but it will ruin the country".
Back then Securities Commission Chairman was Anwar Ibrahim man, Tan Sri Dr Munir Majid. He introduce shorting into the market as though Malaysian equity market is big and volume is sufficiently large to withstand any syndicated short position taking.
Malaysia was not and it was risky to allow shorting because companies were relatively small. Any foreign investor could single handedly short and the market cannot absorb the volume. Damn the fundamental and it just goes into freefall.
Since EPF was stuck, it needed to generate return. Getting 5% return for script lending over 3 months is a damn good return.
Lets look at the numbers below: