Economics & Strategy

Tabung Haji (and other funds) will have
a role in national economic recovery plan

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(for the week of 25-28 August 1998)

Tabung Haji to lend DRB-Hicom a helping hand:
Having recently been asked to relinquish its role and equity in the Express Rail Link (ERL) project, the Pilgrim Fund Board is now reported to be pursuing some assets of the highly-geared DRB-Hicom group. It appears to us that these two events are not independent, coming close after each other. With some RM60m compensation expected from its ERL deal, the Fund's resources will be boosted beyond the RM6b mark. Based on Bank Negara 1997 Annual Report, Tabung Haji had RM6.1b in total assets as at end-1997, up by 30% from RM4.7b a year earlier.

We are not about to suggest any misgiving about its performance. Tabung Haji's primary role is still to promote the members' pilgrimage to Mecca. On paper, its investments in equities have been well-regarded, which included some of the fundamentally sound stocks like Nestle, Perlis Plantations, Bank Islam, Federal Flour and Chemical Company of Malaysia. The latest news, however, could tarnish its reputation as a revered institution. The call to "rescue" some of the country's highly-indebted corporates (see our report Company Note July 31, 1998) begs for transparency.

Based on the latest available information, the Fund's assets are invested mainly in corporate securities. Quoted investments accounted for RM1.5b or nearly a quarter of its resources last year. To buy assets from the DRB-Hicom group, it will most likely have to tinker with its "short-term invesments" to release new funds. Question: would buying the stocks of this DRB/Hicom group at current lows be a better choice than the seemingly illiquid properties? One message though: Tabung Haji's pre-eminence in national recovery efforts tells us that the government will tap all available resources to help fund the economic recovery process.

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