The government investment arm Khazanah Nasional has bought part of Mitsubishi Motors' shares in national carmaker Proton as part of a strategic move to raise its stake in anticipation of robust sales, a report said today.

Filings to the securities exchange showed Khazanah acquired 23.87 million shares or 4.35 percent from the Japanese automaker on March 11 via a book building exercise to raise its stake to nearly 35 percent, the New Straits Times said.

Khazanah did not disclose how much it paid for the shares but Mitsubishi announced last week it earned a capital gain of about eight billion yen from the sale of its entire 7.93 percent stake or 43.56 million shares worth about 11 billion yen.

Khazanah is the single largest shareholder in Proton, followed by national oil firm Petronas.

Khazanah managing director Anwar Aji was quoted as saying the company has obtained a waiver from making a mandatory general offer for Proton shares. Under Malaysian law, an investor with more than 33 percent equity must make a mandatory offer for the rest of the shares it does not own in the company.

Anwar said Khazanah has plans for Proton, which is currently undergoing a reorganisation scheme , but declined to elaborate.

"We have bought the shares from (Mitsubishi) and have got the waiver. We already have plans but I can't reveal," he said.

Poor car sales

Trading house Mitsubishi Corp., the core of the Mitsubishi group, holds another 7.9 percent stake in Proton but has denied reports it was also preparing to cash out.

Proton was established in 1983 by Malaysian companies as well as Mitsubishi Motors and some Mitsubishi group companies.

One analyst said Khazanah was positioning for a strategic stake in Proton in anticipation of robust car sales this year following the introduction of the GEN-2 model launched last month using Proton's own Campro engine, and two other new models expected to be unveiled later this year.

Proton has been grappling with poor sales due to intense foreign competition ahead of market liberalisation under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta). Its market share tumbled to 49 percent last year from 60 percent in 2002, with car sales falling 27.5 percent to 155,420 units last year.

Under Afta, import tariffs for most products in the region were cut to below five percent from last year. Malaysia obtained a two-year reprieve for its auto industry until 2005 but it recently said it would further defer reducing duties to the required level until 2008. - AFP