What this new framework will do is, in effect, further narrow the pool of potential buyers. And with fewer eligible bidders, the most probable outcome is lower prices for the property disposals. History has proven this.
Recall that in the 1980s and 1990s, certain shares were designated “bumiputera shares” with transfer restrictions (sometimes, literally stamped on the share certificates), such that they could be sold only to bumiputera investors. This created a two-tier market — the normal market for everyone and a bumiputera-only market for the restricted shares. The smaller pool of buyers in the latter led to lower liquidity and valuations (discounted prices) for the restricted shares. By similar reasoning, there is consistent evidence that Malay Reserve Land tends to be valued at a discount to adjacent unrestricted land and to have slower development potential, again owing in part to the smaller pool of potential buyers and lower liquidity and marketability.
Lower property valuations will hurt the GLCs and GLICs — and Bursa
Getting lower valuations (prices) for their properties will hurt the profits, cash flows and returns of the GLCs and GLICs. As we have said before, one of the reasons for the GLCs’ comparatively low returns, historically, is the lack of clarity of their mandates — of having conflicting commercial versus socioeconomic and national development priorities. This lack of transparency often translates into poor public accountability and governance.
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GLCs dominate Bursa — accounting for 52% of assets, 38% of revenue and 43% of total market capitalisation of all listed companies on the exchange (at the point of writing). Their long-term underperformance — in terms of margins and returns on equity relative to non-GLCs in the same sectors — drags on overall returns, making Bursa less attractive to investors, both domestic and foreign. This is a major reason that Bursa has been a chronic underperformer for more than a decade, why foreign funds have been net sellers in 10 of the last 12 years and why domestic retail participation has been declining in favour of foreign equity markets. We have also explained how an unattractive and ineffective equity market affects the ability of Malaysian companies in fundraising, which, in turn, hampers expansion and growth, and competitiveness in the global market.
This new framework may even derail the government’s own targets under the GEAR-uP (Government-linked Enterprises Activation and Reform Programme) programme. One of the goals is to raise returns on investments for listed GLCs to 7.5%, from the current 3.5%. Lower prices — and hence gains — on their property disposals could set their returns even further behind. This and/or slower asset monetisation (harder to find buyers) could also affect the GLCs’ and GLICs’ plans to invest RM120 billion ($38.4 billion) over five years in the domestic economy.
New framework could, ironically, worsen inequality, including among bumiputeras
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More importantly, we fear the new framework will have the opposite effect of its stated objective, which is to expand inclusiveness and reduce inequality. Should the property disposals end up with lower transacted prices for the GLCs and GLICs, this represents a wealth transfer — rather than wealth creation — from these entities to a small cohort of business elites, the “one percenters”.
While bumiputera corporate ownership is highly concentrated, GLCs and GLICs are caretakers of the nation’s wealth. Their stakeholders are inclusive. Therefore, their returns on investments affect Malaysians from all walks of life — the majority of whom are bumiputeras (70% of total population) — in terms of income flow (dividends) and long-term wealth building.
For example, Amanah Saham Nasional — wholly owned by Permodalan Nasional Bhd — currently manages 18 unit trust funds, owned by more than 15 million Malaysians collectively. Its flagship Amanah Saham Bumiputera alone has more than 11 million bumiputera unitholders. The Employees Provident Fund, the nation’s primary retirement fund for private sector employees, has more than 18 million members. Kumpulan Wang Persaraan manages retirement benefits for all government employees and pensioners whereas Lembaga Tabung Angkatan Tentera plays a similar role for the Malaysian Armed Forces.
Lembaga Tabung Haji, the nation’s pilgrimage fund, manages the savings for some nine million members. All these funds are heavily invested in Bursa, including large stakes in GLCs. Obviously, poorer profits and returns for GLCs and GLICs will affect the people’s income (dividends) and wealth.
Malaysia’s decades-long policy of trickledown economics, one of the main tools under the broader New Economic Policy (NEP), has not lived up to its original intention. Yes, economic wealth is being created for bumiputeras — as seen in reduced income-wealth inequality between the ethnic groups. Household income for bumiputeras has grown at a much faster pace than that of Chinese and Indian households over the past 50 years (see Chart 1). And, yes, poverty among bumiputeras has fallen sharply and the average income-wealth for bumiputeras has increased substantially, driving the emergence of a large middle-class.
Nonetheless, much of this wealth remains concentrated in the hands of a small group of elites and business tycoons. A World Bank report published in February 2025 titled “A Fresh Take on Reducing Inequality and Enhancing Mobility in Malaysia” says: “In 2022, only 13% of total income inequality in Malaysia was explained by differences in average income across ethnicities; 87% reflected differences within each group.” What this means is that income for the richest bumiputeras has increased faster than the rest of the community. In other words, there has been a limited trickling down of wealth to the masses — leading to widening inequality among bumiputeras.
For more stories about where money flows, click here for Capital Section
An earlier study published by the World Inequality Lab in 2019 titled “Income Inequality and Ethnic Cleavages in Malaysia” showed that the average annual growth rate in real national income per adult from 2002 to 2014 was the highest for the top 1% of bumiputeras at 8.3%, well above the 4.1% annual increase for the middle 40% bumiputeras and 5.4% for bottom 50% bumiputeras. The 8.3% real income growth for the top 1% of bumiputeras was also substantially higher than the national real income average annual growth of 3.7% over the same period. Meanwhile, annual real income growth for the top 1% Chinese was 0.6% and top 1% Indians was 3.4% (see Chart 2).
There is no more recent update on these figures.
However, according to another World Inequality Lab study by Khalid and Rosli published in April 2025 (“Measuring Top Incomes using Tax Data: A case study from Malaysia”), the top 1% have seen their share of the nation’s income rise, from 10.6% in 2016 to 11.4% in 2022. Meanwhile, the middle-income group is being squeezed, its income share declining from 44.6% to 44% over the same period. The 2025 World Bank report notes that more Malaysians (70%) now perceive worsening inequality, up from 50% in 2013.
Increasing ‘rent-seeking’ or ‘toll-collecting’ opportunities
The most likely outcome of this new framework — GLCs and GLICs can sell only properties valued at more than RM20 million to companies in which bumiputera shareholders own more than 50% of the equity — is expanding the opportunities for a few chosen bumiputera elites to extract this free economic rent. Their companies can now buy properties from the GLCs and GLICs at a discount to market prices and then flip the same properties at market prices, pocketing the difference — maybe even before any payments are made.
How can this be inclusive, when GLCs and GLICs are deprived of getting the full economic value only to enrich a few? If the purpose is to truly enable genuine bumiputera-owned companies to benefit by fully extracting the value of the properties through their development (which we applaud and should be supported), then the following conditions should be imposed on the land sales:
- The company that acquires the land from the GLCs and GLICs cannot sell the land for at least 30 years (no exception can be granted by anyone); and
- The beneficial ownership and registered ownership of the company cannot be changed or diluted, even after the property is sold, save for when the person dies (again, no exception or exemption can be granted by anyone without it being an abuse of power).
Conclusion
The prospect of more wealth transfer from GLCs and GLICs, which manage the wealth for all Malaysians and the majority of bumiputeras, to the small group of elites will not only reduce inclusiveness but further widen inequality between the ultra-rich and the masses. The April 2025 World Inequality Lab study found that “the Malaysian economy has become less inclusive between 2016 and 2022, albeit marginally”. Weaker returns for GLCs also negatively affect Bursa’s attractiveness and hence its role in economic development and, ultimately, hurt income and wealth building of all Malaysians.
Final, related thoughts
The argument for this new property disposal framework — the sale of property assets of GLCs and GLICs must only be to a company in which bumiputera ownership exceeds 50% — is to safeguard the overall bumiputera shareholder interests in the economy. This implies that the government acknowledges that the shareholdings of these GLCs and GLICs are predominantly bumiputera — in terms of economic interests, since the gains (and future cash flows) accrue largely to the bumiputera community.
And since these GLCs and GLICs now account for 52% of the assets of all listed companies on Bursa, does this not mean that the NEP aspiration of 30% bumiputera ownership of financial assets has already been met?
Portfolio commentary
The Malaysian Portfolio fell 1.1% for the week ended April 8. Kim Loong Resources (+1.6%) and Hong Leong Industries (+0.4%) were the two gaining stocks, while United Plantations (-6.2%), Malayan Banking (-2.9%) and LPI Capital (-0.1%) ended in negative territory. Total portfolio returns now stand at 213.7% since inception. This portfolio is outperforming the benchmark FBM KLCI, which is down 7.3% over the same period, by a long, long way.
The Absolute Returns Portfolio, on the other hand, gained 1%, lifting total portfolio returns to 36.7% since inception. The top gainers were Alibaba Group Holding (+3.2%), Ping An – H (+3.0%) and Sun Hung Kai Properties (+2.8%), while the only two losing stocks were SPDR Gold Minishares Trust (-0.7%) and ChinaAMC Hang Seng Biotech ETF (-0.2%).
The AI Portfolio was also up, by 2.7%, last week. The gains pared total portfolio loss to 4.9% since inception. Most stocks in the portfolio gained led by Marvell Technology (+7.3%), Amazon.com (+5.1%) and Minth Group (+4.4%). Datadog (-1.8%) and Sieyuan Electric Co (-0.5%) were the losers for the week.
Disclaimer: This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks, including the particular stocks mentioned herein. It does not take into account an individual investor’s particular financial situation, investment objectives, investment horizon, risk profile and/or risk preference. Our shareholders, directors and employees may have positions in or may be materially interested in any of the stocks. We may also have or have had dealings with or may provide or have provided content services to the companies mentioned in the reports.
