Tenaga slumps on 1MDB bailout concerns

by **Cals** Tue 26 May 2015, 19:47

Tenaga slumps on 1MDB bailout concerns

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By Jeffrey Tan / The Edge Financial Daily | May 26, 2015 : 9:27 AM MYT

KUALA LUMPUR: Heavy selling persisted on [size=14]Tenaga Nasional Bhd ([You must be registered and logged in to see this image.] Financial Dashboard), which plunged as much as 72 sen or 5.3% intraday, amid concerns that the utility group might buy the power assets owned by cash-strapped 1Malaysia Development Bhd (1MDB), which the Public Accounts Committee (PAC) has started a probe on.

The sharp fall on heavyweight Tenaga’s share price dragged down the FBM KLCI, with the benchmark index closing in the red for three consecutive days. The index slid 20.12 points to 1,767.38 points — the lowest since Jan 21. The KLCI has lost 95.2 points from its recent peak of 1,862.58 points on April 24.

The selling on the local bourse was rather broad-based, with 808 decliners outnumbering 129 gainers while 224 were unchanged.

The FBM Small Cap Index fell 317.93 points to 16,162.7 points

Tenaga’s share price managed to close above its intraday low of RM12.98 at its five-month low of RM13.24, down 46 sen with 23.85 million shares changing hands.

In a recent interview with The Edge weekly, Tenaga chief executive officer (CEO) Datuk Seri Azman Mohd acknowledged that the utility group is keen on taking over 1MDB’s power plant project, called Project 3B, as the government’s investment fund has not been able to kick-start the project according to schedule partly due to lack of funding. But he reiterated that Tenaga would not take over the project at any costs, saying the price has to be fair.

Still, analysts noted investors were concerned that any parties, for instance Tenaga or any government-linked corporations, would have to step in to bail out 1MDB.

Some fund managers noted that Tenaga was also a selling target partly because the stock had been rather resilient in terms of share price performance. It was one of the few component stocks that were still hovering near the peak after the heavy selldown last October following the collapse of crude oil prices.

Besides Tenaga, mounting concern over the controversial debt-laden 1MDB has also dampened market sentiment of late.

“Market sentiment is weak. It could be due to the 1MDB issue,” Philip Capital fund manager Ang Kok Heng told The Edge Financial Daily.

Yesterday the PAC announced that 1MDB president Arul Kanda Kandasamy and former CEO Datuk Shahrol Halmi had requested that proceedings be postponed due to overseas travelling commitments made earlier.

Such news spooked the already weak market, said a remisier.

The announcement of the 11th Malaysia Plan, which raised some hope that it would provide buying impetus in the local bourse, was overshadowed by the growing concern over 1MDB, which resulted in political concerns, said analysts. Furthermore, some analysts said, the current financial result season also failed to bring excitement to the market.

Fund managers seemed to indicate market sentiment may remain cautious in the near term.

There is a possibility the index may fall below 1,700 points depending on how things unfold on 1MDB, a dealer opined. But he said the KLCI would not suffer a “tremendous crash” as local funds — which he estimated to comprise 70% of the market — may shore up support.

Areca Capital CEO Danny Wong expects volatility and selling pressure to continue.

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This article first appeared in The Edge Financial Daily, on May 26, 2015.
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