Glee for GLICs

IT was a banner year for a number of large GLICs (government-linked investment companies) in 2024.

Permodalan Nasional Bhd (PNB) declared a dividend of 5.75 sen for the year, its highest in five years. Then there is the much anticipated Employees Provident Fund (EPF) dividend rate to be announced on March 1. Given EPF’s better payouts than PNB in recent years, a solid year is expected.

And Khazanah Nasional Bhd’s stellar showing is indicative of the stock market’s performance. A 9.4% rise in Bursa Malaysia last year translated into Khazanah’s best growth for its asset base. Its time weighted rate of return grew by 24.6% in 2024 compared with 5.7% in 2023.

Another performance indicator was its RM5.1bil in profit from operations. While some may say it is lower than the RM5.9bil in 2023, there was a huge one-off gain of RM1.8bil in 2023 from the capital restructuring of PLUS Malaysia Bhd.

Khazanah appears to be humming along quite well although admittedly there will be challenges this year. World trade is projected to rise by 3.3% this year – higher than 2024 – but uncertainties caused by the Donald Trump presidency might make it tougher.

Those uncertainties, especially surrounding tariffs, will also influence the US stock market which then can spill over to the rest of the world.

One of the takeaways from Khazanah’s plans going forward is the domestic-centric approach towards growing its portfolio. It has four domestic pillars – transforming firms, energy transition, connectivity and digitalisation.

A lot of money is being ploughed into the first pillar which would see Khazanah involved with the venture capital ecosystem, engaged in mid-tier companies and strengthening the semiconductor supply chain.

Khazanah will commit RM1bil towards each of those initiatives and the main objective under Dana Impak is to raise Malaysia’s competitiveness and resilience in bolstering economic growth.

The approach is different from what Khazanah has been doing in the past. Focusing on the domestic industry especially when it comes to smaller companies is more of “national service’ to lift the capability of smaller firms. The venture capital approach is fine in that it is a tried and tested route for large funds like Khazanah.

The involvement in the mid-tier companies may offer tremendous potential. What such firms may require most is access to funding and it will mean not letting go of the precious capital ploughed into those companies. The mid-tier companies are often those that are successful, able to be floated on the capital market but have chosen to remain in private hands.

There is also the upgrading and conservation of heritage buildings that cost a lot of money, but will add considerable cultural wealth to Malaysia and expand tourism offerings. These include the Sultan Abdul Samad Building and Carcosa Seri Negara.

Plans and objectives were also disclosed on Khazanah’s investment in Malaysia Airlines and Malaysia Airports.

Amid plans to uplift domestic investments, there should not be a rule by government to just concentrate more on domestic investments.

Global markets too bring great benefit to a company like Khazanah as investments abroad have grown by 9.8% on a rolling six-year time weighted rate of return basis compared with 6.5% for domestic investments.

Risk-taking is needed for investments abroad and there has to be a balance between what can be earned against ploughing money into strategic domestic industries.

After all, Malaysia takes great pains in attracting foreign capital and we should extend that same opportunity of access for Malaysian firms venturing abroad.

There is only so much know-how Malaysia can extract from domestic sources. Its the investments abroad that will keep our investment trends and opportunities up to speed.