Abu Dhabi: Abu Dhabi state fund Aabar Investments may refuse to invest in a 2.5 billion ringgit ($565 million) rights issue by RHB Capital in a sign of disappointment among Gulf investors with economic and political instability in Malaysia.
RHB, Malaysia’s fourth largest bank by assets, announced the rights issue in April to support its growth and meet regulatory requirements for capital. Aabar owns about 21 per cent of the bank.
Sources with knowledge of the matter told Reuters in the last few days that Aabar was unlikely to buy into the offer, at least partly because it was disappointed by the performance of its investment in RHB as Malaysia’s currency and financial markets sag.
“Aabar isn’t too happy with their investment in RHB and they aren’t going to subscribe,” said a Malaysian investment banker who is in contact with RHB, declining to be named because of commercial sensitivities.
Spokesmen for Aabar and RHB declined to comment.
Malaysia’s markets have been hit this year by a worsening of its trade position due to weak prices for liquefied natural gas exports, and by allegations of mismanagement and graft at state fund 1Malaysia Development Berhad, whose advisory board is chaired by Prime Minister Najib Razak.
Shares in RHB are down 21pc since the end of 2014 and 44pc lower than the price at which Aabar bought its RHB stake from Abu Dhabi Commercial Bank in June 2011. The stake is now worth about $740m.
RHB said last week that it was extending the period for subscriptions to its rights issue by nearly two months, after Malaysia’s central bank ordered that Aabar be allowed to buy no more than 15pc of the rights – a restriction included in the 2011 deal through which Aabar purchased its original stake.
The closing of the offer was delayed to November 23 “to allow time for the board to engage with the relevant regulators and to deliberate and implement the rights issue in the most efficient manner, after considering the order”, RHB said last week.
But the sources told Reuters that regardless of the 15pc restriction, Aabar was reluctant to buy any rights.
Moreover, a source close to the senior management of Abu Dhabi’s state-owned International Petroleum Investment Company, the parent of Aabar, said Aabar was unlikely to subscribe.
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