BusinessTimes
THE Government is floating a RM840 million syariah-compliant exchange-traded fund (ETF) on Bursa Malaysia next week, which will help in its plan to gradually sell down stakes in state-controlled firms.
"There are more coming. This is a good critical amount to start off with, but we will add on more," Second Finance Minister Tan Sri Nor Mohamed Yakcop said at the prospectus launch in Kuala Lumpur yesterday.
The government has planned to set up an ETF worth RM3.5 billion, and Nor Mohamed said there could be another one within this year.
He said Malaysia will use a combination of methods to gradually cut its stake in government-linked corporations (GLC), including selling directly in the market, through the setting up of ETF, or by selling bonds that are convertible into shares in the GLCs.
"There is no particular benchmark of reduction as such (as to how much shares in GLCs that the government plans to sell down)," the minister said.
"We want to help improve liquidity and we need to create the vibrancy and robustness of the market," he added. ETF is essentially a unit trust fund that is listed and traded on a stock exchange and designed to track the performance of an index.
The RM840 million MyETF Dow Jones Islamic Market Malaysia Titan 25 (MyETF-DJIM 25) is Asia's first Islamic ETF, giving investors immediate exposure to 25 leading Malaysian stocks. It will be managed by i-VCAP Management Sdn Bhd, a wholly-owned subsidiary of state-owned fund manager Valuecap Sdn Bhd.
"Despite the general (negative) sentiment on the market now, the product itself is a good one. This one particularly draws on the strength of Malaysia market," said OSK Investment Bank Bhd's head of derivatives and structure product Foo Keah Keat.
Plantation shares like Sime Darby and IOI Corp make up more than half of the index that the fund tracks. Other members of the index are major stocks in construction and property-related, oil and gas, as well as telecommunications.
"At OSK, we are bullish on sectors like plantation and construction. So this ETF is also a good sector play," Foo said.
Seven GLCs, including Khazanah Nasional Bhd and Permodalan Nasional Bhd, will each provide RM120 million worth of the underlying basket of shares. In exchange, the GLCs will each subscribe for 100 million units of the ETF. The remaining 140 million units are reserved for retail and institutional investors. Investors can subscribe for the units from the participating dealers, from today until January 28.
The ETF is scheduled to be listed on January 31.
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