EPF's investment income for 1st quarter up 73.9pc to RM11.8b
But fund stays cautious amid weak recovery in commodity prices, currency volatility
THE Employees Provident Fund (EPF) has posted solid results in the first three months but chief executive officer Datuk Shahril Ridza Ridzuan is cautious about its outlook due to persistent weak recovery in commodity prices and currency volatility.
The country’s largest pension fund posted an investment income of RM11.79 billion for the first quarter ended March, up 73.9 per cent from RM6.78 billion a year ago.
The value of EPF investment assets reached RM747.17 billion, up 2.2 per cent, or RM16.06 billion, from December 31 last year.
Shahril said the domestic and global markets had improved significantly and its equity asset class contributed the largest portion to the investment income.
“While we have had an encouraging first quarter, we remain cautious moving forward, as recovery in commodity prices remains weak, with continued currency volatility.”
He noted that the FTSE Bursa Malaysia KLCI had grown by six per cent during the period, driven by the growth in the banking sector. Global indices, meanwhile, improved by as much as 12 per cent, a striking difference from the environment last year.
“The positive market condition was conducive for profit-taking activities leading to higher gross investment income in the first quarter of this year, and also lower net impairment.”
In accordance with the Malaysian Financial Reporting Standards, the EPF recorded lower net impairments to RM775.92 million from RM1.64 billion this year following the improvement in major markets.
During the quarter, equities made up 41.76 per cent of the EPF’s total investment assets, contributing RM7.1 billion. This represented 60.2 per cent of total investment income.
The EPF said this was 178.6 per cent higher than the RM2.55 billion recorded i n the corresponding quarter last year.
“The recovery in the banking sector contributed to about 30 per cent of the trading and dividend income for the portfolio during the quarter.”
Following the commencement of Simpanan Shariah on January 1, RM952.1 million of the total gross investment i ncome of RM11.79 billion was generated for Simpanan Shariah while RM10.84 billion was for the conventional account.
Shahril said the performance of Simpanan Shariah and the conventional account would depend on market performance, thus making short-term differences between the two inevitable.
In the long run, the performance of the two should be similar following similar strategies implemented for both accounts, he added.
He said EPF remained focused on delivering a real dividend target of at least two per cent above inflation over a three-year rolling period for both Simpanan Shariah and conventional account.
Equities made up 41.76 per cent of the Employees Provident Fund’s total investment assets in the first quarter of this year.