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Entire board of Malaysia’s SWF quits

All nine members of Khazanah Nasional's board of directors have resigned, possibly impacting foreign funds with positions in Malaysian companies.

The board of the sovereign wealth fund, including the managing director, resigned after unanimously agreeing that prime minister Mahathir Mohamad must decide who will sit on Khazanah’s board, according to a report in Singapore’s Straits Times.

The prime minister, who assumed office after the general election in May, had been an outspoken critic of cronyism at the RM157.2bn ($38.67bn) state fund and has railed against corruption in general in the country.

When his like-minded administration installs a new board of directors, it could have an impact on the fund’s portfolio, which in turn could affect foreign managers with large exposure to the same positions, the report said.

“There is strong speculation in Malaysian financial circles that any new leadership Dr Mahathir installs at Khazanah in the coming weeks will likely pursue management changes to the group’s stable of investments…

“That, in turn, could create some uncertainty among foreign portfolio investors, who are major owners of shares in the Khazanah-related listed entities, bankers said.”

Major holdings of the SWF are in Malaysia (55%), followed by Singapore (11.8%) and China (7.6%), according to Khazanah’s website.

Financial services are the largest sector exposure and major positions include CIMB Group. The SWF also has exposure to widely-held tech companies Alibaba and Infosys.

According to FE data, 46 funds have greater than 3% individual stock exposure to CIMB Group in their top ten holdings.

In terms of funds, 248 active and passive products have more than 40% exposure to Malaysia, FE data shows.

Actively-managed funds with the highest exposure include Malaysia single country funds managed by Fidelity, JP Morgan AM, Manulife, Eastspring and Affin Hwang.

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