Malaysia wants to break up big firms without hurting stocks
Malaysia is considering the merits of having the state control its biggest companies, after moves to break up their dominance in sectors from the Internet to electricity led to declines in Asia’s worst major stock market.
(The Edge Markets) – The government needs to review on a case-by-case basis whether it needs to hold on to its golden shares in state-linked firms, as the 1MDB scandal proves it’s still needed, Prime Minister Tun Dr Mahathir Mohamad said on Tuesday. His administration has sought to make the companies more efficient to meet its campaign promise of lowering living costs, a drive that analysts expect to benefit the economy in the long run.
Yet Dr Mahathir walks a tightrope as he tries to overhaul state-linked firms that have stifled competition, without causing an earnings upheaval and spooking investors. The US-China trade war that triggered foreign stock outflows across Asia hasn’t helped either — Malaysia’s benchmark index fell 6% last year, the most since 2008.
State operator Telekom Malaysia Bhd was the first hit when the country slashed broadband prices as part of an election pledge. That triggered a loss of almost US$1 billion in its market value since May 2018. Now, power firm Tenaga Nasional Bhd is bracing for new players as the government moves to open up the retail electricity market. Its shares have slumped 18% since September 2018 when the government first mooted the plan.
