Consider RHB SOLD to KFH

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Jan 09 2007
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If today’s financial reported by TheStar on “More FDIs from Gulf countries” is any indicator to goes by, this piece of news will definitely a “strong hint” that Kuwait Finance House ( KFH ) is very close in signing the agreement to buy over the 32.8% stake in financial supermarket, Rashid Hussain Bhd (KLSE : RHB, stock-code 1309), from the empire of Sarawak Chief Minister Abdul Taib Mahmud whose family controls Cahya Mata Sarawak Bhd which controls Rashid’s parent, Utama Banking Group (KLSE : UBG, stock-code 6831).

How often do you see such a photo of a confident person posing in front of his company together with such a headline? The fact is RHB is ailing with cancer as bad as Proton and the only way to save it is to SELL it. Given a choice, based on Government of Malaysia’s policy of close protectionism, it wouldn’t want to part of any of its’ assets if not desperate. As far as Proton Holdings Bhd (KLSE : PROTON, stock-code : 5304) is concern, there’s no Islamic country which has a strong automobile industry which can roped in to save it, so Volkswagen Aktiengessellschaft (FRA : VOW) is the only option. But for financial sector, the story is different as almost all the countries in the globe has its’ own financial companies.

After the 1997 Asia Economy Crisis, Malaysian Government has spent billions of ringgit bailing out GLC (Government-Link Companies) from bankrupt due to over-exposure in U.S. dollars, though some couldn’t be saved such as RENONG and United Engineering. Another round of bail-out is not feasible and would be disastrous to the country’s coffer. Malaysia, being (or rather declared by Mahathir) an Islamic country would prefer another country of the same religion if the need for partnership surface. So KFH, which is the world’s second largest Islamic bank in terms of asset size and net profit after Saudi Arabia’s Al Rajhi Bank becomes the perfect candidate for marriage with RHB. Furthermore, KFH is on the expansion mode and there’s no heavyweight Islamic financial house yet in Malaysia (by heavyweight I mean a real cash-rich globally recognized brand).

Most importantly, Malaysia needs FDI urgently (foreign direct investments) but the close protectionism policy does not amuse western investors. Out of desperation, it was the hope of finance ministry of Malaysian government to attract FDI from Gulf Cooperation Council members instead.

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