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Asia300

China remains Malaysia's top investment target

Sovereign fund Khazanah Nasional in search for next Alibaba

KUALA LUMPUR -- China is the preferred investment destination for Malaysian sovereign fund Khazanah Nasional, thanks to growing bilateral ties and the mushrooming of technology companies there in recent years.

While the bulk of its investments through equity shareholding is still focused domestically, its overseas exposure has also been climbing steadily. According to a Khazanah statement on Wednesday, China tops the list, accounting for 7% of its realizable asset value of 157.2 billion ringgit ($40 billion) in 2017, surpassing Singapore which stood at 5.8% since Khazanah was established in 1994. The fund's RAV, the market value of all its equities, securities and cash, grew 29.2% from 2012 when investment in China accounted for just 2.2%, trailing Singapore's 3.7%.

Last year, Khazanah's investment in China yielded 1.8 billion ringgit in RAV through e-commerce giant Alibaba Group Holding and another 800 million ringgit through equity trading. Under a bilateral arrangement, Beijing granted Malaysia access to its capital markets through its Qualified Foreign Institutional Investor program.

Khazanah started to dabble in the technology sector in 2012, marking a move to diversify and create value, as it strengthens investments in other key sectors including telecommunications, power, healthcare and property.

"Investing in tech [companies] is very risky, as you can imagine there are a lot of things going on with technology," Azman Mokhtar, Khazanah managing director told reporters. "But I am comforted and encouraged that we have made big gains on Alibaba and we have reinvested them carefully."

The fund made a gain of nearly $1 billion from a partial divestment of its stake when Alibaba went public in 2014, and has since reinvested in over 30 tech companies globally.

Although investment into the sector in 2017 was not as big as the previous year, Khazanah said it would continue to increase its shares. Last year, it invested in Koubei.com, an Alibaba affiliate that provides information on restaurants, real estates and other consumer services. Other investments include France's Sigfox and Viet Thai International, a Vietnamese consumer and retail outfit.

In Malaysia, Khazanah's investment portfolio in strategic companies including Tenaga Nasional, CIMB Group Holdings, Axiata Group and IHH Healthcare are among the top 10 biggest companies by market capitalization. Like Singapore's Temasek Holdings, Khazanah has been playing a major role in Malaysia socio-economic development following a strategic revamp in 2004. Since then, it has made 88 billion ringgit worth of investment and contributed 11.7 billion ringgit in dividends and taxes to the state coffer.

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