MALAYSIA’S largest fund manager Permodalan Nasional Bhd (PNB) looking to divest of some of its cash is hampered by a weak ringgit and lack of viable investment opportunity.
PNB chairman Abdul Wahid Omar told Bloomberg in an interview that the investment fund could reduce its cash and money market holdings to free up billions of ringgit, but was restrained by current foreign exchange rates.
A fifth of PNB’s RM266 billion assets under management are in cash and money markets, and the five percentage point reduction that Wahid proposes would free up RM13.3 billion for investment.
However, the ringgit, being “relatively weak”, is among factors holding PNB back from more aggressive acquisitioning.
“The last thing you want is that you invest in a US dollar asset at 4.30 and within a year, the ringgit strengthens, by say, 5%,” Wahid said.
Earlier this year, the ringgit declined to levels not seen since the Asian financial crisis of the late 1990s. It has rebounded and is at 4.29 per dollar.
“At the right time, at the right opportunity, then we will make those investments,” said Wahib.
Even then, PNB isn’t likely to hold more than one tenth of of its assets overseas because its liabilities are in ringgit, he said.
PNB remains heavily invested in Malaysia, where 98% of its assets are.
“It is very important for us to continue to invest mainly in Malaysia, not only from the asset-liability perspective, but also from the economic multiplier perspective.”
PNB’s money is mainly invested in equities, owning stakes in Malayan Banking Bhd, Sime Darby Bhd, and UMW Holdings Bhd. Its domestic equity investments of RM180 billion ringgit is equivalent to about 10% Kuala Lumpur Stock Exchange’s market capitalisation.
PNB may move more of its cash into the fixed income, private equity and property segments, which currently make up just over 10% of its holdings, as it works towards achieving the target RM350 billion in assets under management by 2022.
That would be two years after PNB has completed building Malaysia’s highest tower in 2020. And that, again, would be a year after the initial public offering of PNB’s infrastructure unit, Projek Lintasan Kota Holdings Sdn, planned for 2019, Wahid said.