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MSWG Weekly Newsletter 12 October 2018 (English)
12.10.2018
MESSAGE FROM THE CEO
Increasing Free Float Through Government Divestments
The government has indicated that it will consider downsizing its stakes in GLCs which are held by Government-Related Institutions such as Khazanah Nasional Bhd, Employees Provident Fund, Lembaga Tabung Angkatan Tentera, Kumpulan Wang Persaraan (Diperbadankan) and Permodalan Nasional Bhd, (currently held via GLICs and Khazanah). The collateral benefit is increased free float…more shares floating in the market which allows investors to buy these GLC shares without causing share price spikes. The foreign institutional investors love increased free float too…very much. Foreign institutional investors buy in bulk and if there is not enough free float such bulk buying often sends share prices spiraling because of limited supply. Moreover, it may be harder for them to buy in large quantities and the spread in share prices may be pretty wide too.
It is no secret that the Government-Related Institutions can influence the market and the stock market indices due to their sheer size of shareholdings. Some say that the higher PE (price earnings ratio) enjoyed by companies listed on the Malaysian stock exchange, compared to its regional peers, is due to the heavy...