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Sunday, September 03, 2006

The Road to Hell is Paved with Good Intentions*

This is the second time that thousands of small investors have been deprived of the chance to invest in ASW2020 shares as the fund manager PNB did not provide safeguards to ensure that more Malaysians are given the opportunity to own such shares.

PNB has failed a provide a good mechanism whereby the small investor is given priority.

Before any such shares are issued in the future, I suggest that PNB issue a breakdown of who are the owners of such shares as follows:

1 to 100 shares owned by 100000
101 to 1000 shares owned by 65000
1000 to 10000 shares
10001 to 50000 shares
500001 to 1000000 shares
above 1000000 shares owned by 20

The government can then conduct an exercise so that at least 80% of such shares are owned by 60% of the population with the smaller investors being given greater priority.
For example it is better to give 5 investors 20,000 shares than 2 investors 50,000 shares.

Based on the above survey, the government should instruct PNB to repurchase the “overlimit” from the larger investors and resell to the smaller holdings.

For future such issues, the following is proposed:

About 3 months before the sale of such shares, the public is asked to open an ASW account if they want to subscribe and if they have not reached the maximum limit of perhaps RM200k.

One month before the sales date, the public will be asked to pay into the ASW account at various agent banks the shares they want such as RM100 or up to the maximum say RM5000.

This pay-in period to subscribe will last two weeks and after that I suggest there will be an exercise similar to a public issue whereby the public is allowed to bid for lots 10,000 and above.

If there is over subscription, the shares will be done on allocation basis.
Example if you apply for 10,000 shares, you may be given 6,000shares.

After one or two such issues, the fund manager should be able to adjust the pay-in amount so that the public issue exercise becomes minimal.

PNB has been in the investment field for decades. Surely they can devise a better means to implement government policies?

photo: Pinnacles, WA


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