Malaysia’s statutory pension fund has been questioned by lawmakers over “losses” of up to RM700 million (S$212 million) it allegedly incurred by selling 163 million shares in Malaysia Airports Holdings (MAHB) for as low as RM6.80 per share just months before buying them back for RM11 apiece in a privatisation deal.
On Feb 17, a parliamentary panel summoned top executives from the Employees Provident Fund (EPF), a substantial shareholder in MAHB, to explain the deal that would delist the state-controlled airport operator and bring in fresh investors including US investment fund BlackRock’s Global Infrastructure Partners.
EPF’s chief executive Ahmad Zulqarnain Onn attended the hearing. Also summoned to brief the Select Committee on Finance and Economy was EPF’s partner in the MAHB privatisation, the country’s sovereign wealth fund Khazanah Nasional.
Several sources in the know about the hearing told The Straits Times that the committee also grilled EPF on why it had slashed its MAHB stake from 15.6 per cent to 5.8 per cent between December 2022 and December 2023, before then raising its stake to 30 per cent as part of the consortium taking the Malaysian company private.
Critics say these sales, transacted at between RM6.80 and RM7.70 apiece, had resulted in “losses” ranging from RM500 million to RM700 million when EPF needed to repurchase the 163 million shares back at a higher price under the privatisation exercise.
EPF has held shares in MAHB, which runs 40 airports nationwide, since its listing in 1999.
It had never reduced its holdings as drastically as it did in 2023, shedding nearly 10 percentage points. Aside from this, in the two decades since 2005, it has never divested more than two percentage points in a year.
Finance Minister II Amir Hamzah Azizan, who was EPF’s CEO during the period when the fund slashed its stake in MAHB up until he joined the Cabinet in December 2023, has denied any wrongdoing.
On Feb 20 in Parliament, he defended the share divestment, saying that “Chinese walls” were in place at the fund to keep EPF’s trading and strategic investment teams from sharing sensitive information with each other and prevent insider trading, in accordance with the Capital Markets and Services Act (CMSA).
A Chinese wall or “ethical wall” in business refers to a virtual information barrier erected between those with and without material, non-public information to prevent conflicts of interest. This is to ensure that insider information does not translate into insider trading, which is a criminal offence.
The minister added that the much-criticised sale of MAHB shares before the privatisation exercise had realised gains of RM102 million, not losses.
Much of the divestment happened during the latter part of 2023 when the pension fund with 16 million members was already mulling over a “strategic investment” into MAHB, according to sources privy to the Select Committee hearing.
“The EPF CEO confirmed that his position is ‘above the (Chinese) wall’ but insisted that not interfering with the traders and fund managers was legally necessary,” a source said.
EPF chief investment officer Rohaya Yusof, whose department oversees stock exchange, private equity and strategic investments, sits on the MAHB board and would also have been in the know about details of the privatisation, the source noted.
Senior leaders from Malaysian Prime Minister Anwar Ibrahim’s ruling alliance and veteran financial journalists have insisted that EPF is not a bank but an investment firm, and as such is not bound to implement the Chinese walls requirement. Instead, it should make investment decisions based on all available information.
The CMSA specifically excludes corporations and their officers from insider trading rules when trading shares of other companies “merely because (they are) aware that (they propose) to enter into or (have) previously entered into one or more transactions or agreements in relation to those” companies in the course of their duties.
Some critics have suggested that to avoid suspicion of insider trading, EPF should have stopped all trades in MAHB the moment it began working on the privatisation deal.
“It’s like a father who is above the wall who purchases a home for RM250,000, with one son selling it off for RM600,000 and it (being) repurchased by another son for RM1.1 million,” said Malaysian Chinese Association president Wee Ka Siong, a former transport minister who used to oversee the aviation industry.
“Who profited from this? And who incurred losses… obviously, the (EPF) contributors,” he added in a Facebook post on Jan 18.
Malaysia’s EPF, which is similar to Singapore’s Central Provident Fund, manages the compulsory savings plan and retirement planning for workers in the country.
All employees and their employers in Malaysia are required by law to contribute to the fund.
Dr Wee’s sentiment was echoed by Umno veteran and former finance minister Tengku Razaleigh Hamzah, who has called on the authorities, including anti-graft enforcers, to probe whether EPF acted on external instructions.
“I believe there is an element of manipulation here that cannot be forgiven,” he said in a video on Facebook on Feb 21.
So far, it has been largely Democratic Action Party MPs, whose leader is Transport Minister Anthony Loke, who have defended the deal against the opposition, as well as friendly fire.
The move to bring in BlackRock had sparked controversy, especially among the country’s Malay-Muslim majority when the privatisation deal was announced in May 2024 owing to the US firm’s business links to Israel.
There were further grumbles in January when the acceptance threshold of the RM11 takeover offer was reduced to 85 per cent, after it failed to reach an initial 90 per cent despite an extension of the deadline.
All five MAHB independent directors had advised shareholders not to accept the offer and resigned upon the airport operator’s delisting on Feb 25.
ST has reached out to Securities Commission Malaysia for comment. The industry regulator had said in January that it was “monitoring the situation closely”.
Source : Straits Times
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