(Petaling Jaya, Tuesday): United Engineers (M) Bhd surprise RM2.4 billion bail-out of Renong to the detriment of UEM minority shareholders has created a new crisis in the Kuala Lumpur Stock Exchange by plunging a very volatile investor confidence in Malaysia to a new low because of acute lack of transparency.
This is reflected by this morning's stock market, where the KLSE Composite Index fell to a new low of 625.77 points, down 41.52 at the close of the morning's trading, when in Singapore the Straits Times Index fell by only 9.56 points to 1,689. The UEM counter broke the 30 per cent limit down in about one-and-a-half hours, falling from RM6.25 to RM4.38 per share.
The circumstances of the announcement that UEM had acquired 723 million Renong shares at RM3.24 each involving a total price of RM2.4 billion is also very mysterious.
Firstly, although the purchase was made in a series of transactions on the open market, the minority shareholders were completely kept in the dark. The 723 million shares were bought at an average of RM3.24 per share, which is 11.7 per cent higher than Renong's closing price yesterday of RM2.90.
Secondly, the Foreign Investment Committee has granted UEM a waiver of the requirement to extend a general offer to minority shares. Thirdly, the announcement was made at 8 p.m. last night (Monday), which has heightened the mystery and the acute lack of transparency of the deal.
What was the justification of the waiver? Is the UEM using the shareholders' funds to bail out Renong? It has been estimated that UEM-wise investment, UEM has lost approximately RM650 million as a result of this Renong purchase.
Unless the many questions crying out for answer in the UEM surprise purchase of Renong is given, there can only be a further plunge in investor confidence.
Renong has been openly referred to as the "chief financial arm of UMNO", which was formally sold to a close party associate, Halim Saad, but who had publicly said that he holds the shares on behalf of the party.
The latest asset shuffle has been seen as aimed to get UEM to shoulder Renong's cash burden to protect UMNO interests and has been received very badly in the market. One UK-based fund manager has been quoted in the foreign press as saying: "This isn't surprising. This sort of deal is another example showing that the Malaysian playing field is not level for foreign and other minority investors. They won't be keen to invest in a country which allows deals of this nature."
The Finance Minister, Datuk Seri Anwar Ibrahim should make a Ministerial statement in Parliament tomorrow on the UEM's surprise bail-out of Renong in the RM2.4 billion purchase to restore investor confidence by answering all the nagging questions about the deal and to establish full transparency in the KLSE.