Wednesday, March 22, 2006

Khazanah and PNB Should Follow Temasek
Further Sale Of SingTel Shares

Temasek continued with its efforts to sell down its stake in SingTel by raising S$2 billion by selling 770 million shares at S$2.66 or a 5% discount from the market price. The sale reduced Temasek's stake in SingTel from 61% to 56.3%. The deal was arranged and placed out by Goldman Sachs. The last sale was in November 2004 when Temasek sold 2% of SingTel.

Of course there could be plenty of reasons for the continued sale: boosting free float; reducing exposure to local assets in preference of overseas assets by Temasek; to help fund the purchase of Shin Corp; part of the trade deal with the US; diversifying away from telecommunications into banks, plantations and drug makers; etc... Still, PNB and Khazanah should take the lead by reducing stakes in government linked companies in Malaysia. As I have frequently argued before, you want more free float, not more control. I can understand if PNB/Khazanah do not want to sell companies if they are performing badly now as they can get better pricing in the future.... but surely not ALL GLCs are badly run.... or am I mistaken? I think Yusli, the CEO of Bursa Malaysia, may be a secret reader of my blog as he said yesterday that he ALSO wanted Khazanah and PNB to start selling down shares to boost liquidity. Hmmm....

Just remember, more free float does not mean lower prices, that's a proven fact in many studies. If you have to maintain stock prices by controlling the free float, that tells a lot about the management:

1) That management is defensive and see investors as competitors for the same pie
2) That management does not wish to share growth prospects and potential with investors till its way over valued
3) That management has a narrow viewpoint with regards to control issues
4) That management is wary of accountability and the ability to meet up to a more open challange to their corporate leadership

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