EPF. Major ShareHolders Exit KNM. Why ?

KNM Group Bhd was the most actively traded counter today (15.10.2008) with 154.19 million shares of the company’s equity changing hands. The process equipment manufacturuer’s shares slipped RM -0.215 sen to RM 0.69 sen at the close of trade. KNM slipped into penny stock category last Friday.

Announcements to Bursa Malaysia indicate that the Employees Provident Fund (EPF) disposed of about eight million shares in the company on Oct 8, trimming its shareholding to 272.8 million shares or 6.9% of the share capital.

EPF had come into KNM with a 5.3% shareholding in mid-June last year and had been trading the company’s shares heavily but had never disposed of such a big block.

An analyst from a local broking house said that the major sell-down could also be due to KNM’s foreign shareholders dumping their shares in the open market. “They are getting out of emerging markets and pulling back funds to their original country in a bid to support their own economy.”

The analyst was referring to Boston-based FMR LLC and Bermuda-incorporated FIL Ltd (Fidelity). The funds started divesting their equity in August this year after turning bearish on the Malaysian market.

A few months ago, portfolio manager at Fidelity’s US$886 million (RM3.1 billion) Asean fund, Gillian Kwek had said the fund was underweight in Malaysia, “given the political uncertainty and lower business confidence.”

At present FMR and Fidelity control about 9.7% equity or 385.2 million shares in KNM. As at mid-August this year the two funds controlled about 10.5% or 415.8 million shares in KNM. FMR and Fidelity had emerged as substantial shareholders in July last year with a 5.2% take.

KNM has been aggressive with its acquisitions and has businesses in Brazil, Germany, Italy, the US, Canada and Australia, among others. For the six months to June this year, KNM posted a net profit of RM 150.4 million on the back of RM 930.6 million revenue, an incraese of 99% and 77%, respectively from a year earlier.