Perhaps nothing alarming that EPF pares down its stake below 5% in Top Glove

Editor’s note: This is a follow-up to “Hold your applause … there’s more for Top Glove than meets the eye” which was published on Jan 8.

 

MAYBE there’s no cause of concern after all that the Employees Provident Fund’s (EPF) has ceased to be Top Glove Corp Bhd’s substantial shareholder.

This is because the retirement fund’s disposal of 40 million shares or a 0.5% direct interest on Jan 5 which brought its shareholding in the world’s largest shareholder to below the 5% substantial shareholder threshold is related to Securities Borrowing and Lending (SBL).

As Top Glove’s Bursa Malaysia filing yesterday (Jan 8) stated, “disposal of 40,000,000 shares (SBL) by Citigroup Nominees (Tempatan) Sdn Bhd”, this meant that EPF has lent out its Top Glove shares for a fee to investors who intend to short the stock.

By lending out it shares to facilitate regulated short selling (RSS), EPF will not only be able to earn a fee/interest but able to buy back Top Glove shares at a lower price after the share price has been pressed down.

Following the Jan 5 disposal, EPF’s stake in Top Glove dwindled to 392.85 million shares or an equivalent of 4.9% stake in the glove maker. Prior to this, EPF’s shareholding in Top Glove was 5.39% or 432.85 million shares on Monday (Jan 4).

Recall that Bursa Malaysia has lifted the suspension of regulated short-selling (RSS) effective Jan 1 after the sanction was put in place for nine months to mitigate market volatility arising from the broader impact of the COVID-19 pandemic.

According to the market regulator, the lifting of the RSS ban is to facilitate investors’ risk management and revive SBL activities which is an integral capital market function to promote product development and market making activities.

On Jan 4 which was the first trading day for 2021, share price of Top Glove (and fellow Big Four glove makers) plummeted 62 sen or 10.13% to close at RM5.50 amid a heavy volume of 347.86 million shares.

However, share price of Top Glove (and fellow Big Four glove makers) rebounded sharply at the close of the year’s first trading week (Jan 8) by edging up 70 sen or 12.07% at RM6.50 with 147.65 million shares transacted.

In our article yesterday, FocusM has attributed EPF’s tendency of paring down its stake in Top Glove to the increasingly stringent environment, social and corporate governance (ESG) standards being pursued by institutional investors these days.

Of interest would be that of Blackrock and Norges Bank Investment Management (NBIM) who voted against six of Top Glove’s independent non-executive directors at the company’s recent annual general meeting (AGM).

For comparison sake, EPF is still a substantial shareholder in two other Big Four glove makers, notably 8.62 stake in Kossan Rubber Industries Bhd (as of Jan 4) and Hartalega Holdings Bhd (6.24% as of Jan 6). – Jan 9, 2021

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