EPF on a selling spree in August?

The Employees Provident Fund (EPF) has been selling down its stakes in several companies in the first week of the month, with the more notable ones being the disposal of large blocks in IOI Corporation Bhd and Telekom Malaysia Bhd (TM).

It is unclear as to whether the transactions at more than 10 counters resulted in gains or losses, but it certainly was a sensible action by the provident fund to limit losses given the recent slump in equity markets.

“It (sell down) is seen as a prudent move as the provident fund is selling just as the markets start sliding,” said an analyst.

US stocks slumped on Wednesday as negative data from the US and China offered a bleak outlook on the global economic recovery. The Dow Jones Industrial Average dropped 265.42 points or 2.49% to end at 10,378.83, making it the worst drop in nearly a month.

On Wednesday, most Asian markets slumped as data showed Japan’s machinery orders were weaker-than-expected while the growth in Chinese investment slowed down.

The FBM KLCI yesterday lost four more points to settle at 1,349.3. Elsewhere in the region, the Straits Times Index shed 22 points to close at 2,927, The Shanghai SE Composite fell 32 points to settle at 2,575.5, the Hang Seng Index was down 188 points to 21,105.7 and the Nikkei 225 index declined 80 points to 9,212.6.

The EPF’s most notable disposal is the 25.5 million IOI Corp shares it sold between Aug 2 and Aug 5, 2010, bringing its current shareholding in the planter to 12.77%.

In fact, over the past seven trading days, since July 27, 2010, EPF has disposed of a total of 32.72 million shares, or a 0.5% stake, in the plantation heavyweight.

IOI Corp shares were trading between RM5.10 and RM5.13 during the seven-day period.

Yesterday, IOI Corp shares closed three sen lower at RM5.09, ahead of its 4Q FY June 30, 2010 results announcement, which are tentatively due to be released next Tuesday.

The provident fund’s move to shave off its interest in the company is understandable given its high valuations and the challenging outlook for plantation players, although crude palm oil prices have rallied recently on weather concerns.

OSK in a recent note maintained its neutral call on the sector given the crosswinds and threat of overwhelming supply from Indonesia.

It continues to believe the sector will not see a broad-based rally for some time. The house has a neutral call on Kuala Lumpur Kepong Bhd (KLK) and sell recommendations on Sime Darby Bhd and IOI Corp.

Notably also is that on Aug 2 and Aug 3, 2010, EPF had also sold 1.2 million shares of KLK and 5.06 million shares in the country’s largest listed planter Sime Darby Bhd. The provident fund’s current shareholding in KLK stands at 14.9%, and 15.3% at Sime.

The EPF had also disposed of almost 10 million shares or about 0.3% stake in TM between Aug 2 and Aug 6, 2010.

TM shares were trading between RM3.38 and RM3.39 during the five-day period.

Additionally, the provident fund has decreased its shareholding in national utility firm Tenaga Nasional Bhd via the disposal of almost nine million shares on Aug 2 and Aug 3, 2010. Tenaga shares were trading between RM8.59 and RM8.68 during the two-day period.

The EPF had also disposed of some of its interest in the nation’s two largest lenders in terms of asset. Between Aug 2 and Aug 5, 2010, the provident fund sold almost 10 million shares in CIMB Group Holdings Bhd and more than 14 million shares in Malayan Banking Bhd.

But the disposals are negligible given the large base of more than seven billion shares for the two banks respectively. The EPF’s selling spree appears to be across sectors as it had disposed of more than five million shares in builder IJM Corp Bhd and developer UEM Land Holdings Bhd.

Also worth noting is that the EPF had sold less than five million shares each of Gamuda Bhd, MISC Bhd, AMMB Holdings Bhd, Malaysia Airports Holdings Bhd, and DRB-Hicom Bhd between Aug 2 and Aug 5, 2010.



by Isabelle Francis
This article appeared in The Edge Financial Daily, August 13, 2010.