Malaysia: Stocks rise to four-week high on state support plan

[KUALA LUMPUR] Malaysian stocks headed for a four-week high, led by a rally in state-controlled companies, after Prime Minister Najib Razak said the government will tap a fund to support the nation's equities.

The FTSE Bursa Malaysia KLCI Index surged 1.7 per cent to 1,631.27 at 3:21 pm in Kuala Lumpur, set for the highest close since Aug 11. Tenaga Nasional Bhd, a government-controlled power utility, jumped 7.1 per cent, the most since December 2013.

Sime Darby Bhd advanced 5.9 per cent, while palm-oil producer Felda Global Ventures Holdings Bhd soared 20 per cent. The government will "reactivate" Valuecap Sdn with funds of as much as RM20 billion, Mr Najib said on Monday, without giving details.

Malaysia is seeking to bolster confidence in financial markets after international investors pulled RM16.4 billion (US$3.8 billion) of the nation's shares this year, surpassing RM6.9 billion for the whole of 2014.

Malaysia's ringgit has dropped 19 per cent versus the dollar this year, battered by a political scandal, slumping oil prices and the prospect of higher US interest rates that threaten economic growth.

"This is good news as the intention is to prop up the stock market," Ang Kok Heng, chief investment officer at Phillip Capital Management Bhd, which manages US$630 million, said by phone in Kuala Lumpur. "Stocks have fallen a lot."

The KLCI has tumbled 14 per cent from its July 2014 peak. ValueCap started operations in 2003 to bolster government-linked shares after the country's stock market failed to recover from the 1998 Asian financial crisis. A ValueCap spokeswoman couldn't immediately be reached for comment.

"ValueCap was set up as an entity to support undervalued stocks and it was found to be effective in stabilizing the equity markets," Mr Najib said. "ValueCap also generated high returns to its shareholders."

BLOOMBERG