‘MODEST IMPACT ON EPF FROM WITHDRAWALS’

Pension fund has substantial money market buffers in portfolio, says expert

WITHDRAWALS from the Employees Provident Fund (EPF) through facilities such as i-Lestari and i-Sinar will have a modest negative impact in terms of its assets under management (AUM), said an equities expert.

Maybank Kim Eng head of regional equity research Anand Pathmakanthan said the pension fund’s AUM had breached the RM1 trillion mark.

Therefore, he does not see the withdrawals as a dislocation event for Malaysia’s capital market.

Pathmakanthan said the EPF would be able to cushion the impact of the withdrawals, especially with the substantial money market buffers in its portfolio.

“If we look at the EPF’s investments makeup, there are always substantial money market buffers in its portfolio.

“It will invest 30 per cent in equity, 40 per cent in fixed income, 20 per cent in properties and five to seven per cent in money market instruments, which is highly liquid and substantial at about RM70 billion worth the last time we checked.”

He was speaking at a webinar on “Captain Speak: Will Taper Tantrums Spook Asean Again?” organised by Maybank Kim Eng yesterday.

The EPF, which managed over RM1.02 trillion in assets as at end of last year, has been recalibrating its portfolio in preparation for the i-Lestari and i-Sinar schemes while expanding its investments abroad for higher gains.

Nevertheless, Pathmakanthan said overexposure to high-risk assets could have a negative impact on the EPF as its immediate commitments to depositors could push the fund to sell its holdings at a loss.

“It always has liquidity buffers to take care of withdrawal stress, which is what we have seen now. So if you ask me whether the EPF has started selling down holdings, there is definitely not something we expect them to do.

On the local stock market performance, Pathmakanthan said he expected the FTSE Bursa Malaysia KLCI (FBM KLCI) to hit 1,830 by year end.

“We expect the market to play catch-up from the second quarter on acceleration of the Covid-19 vaccination programme, an expected gross domestic product rebound, continued albeit targeted stimulus and rising commodity prices, among others.

“Overall, this year is a positive start for most Asean markets despite continued net foreign sales.

“The implementation of stimulus and monetary packages supports the market with the participation of retail investors,” he said.