Realistic EPF dividend to commensurate with prevailing economy
KUALA LUMPUR: The Employees Provident Fund ( EPF) is expected to declare a realistic dividend for 2016 this weekend that will commensurate with prevailing market conditions for funds.
Weaknesses in equities market and a low series of commodity prices have cast a shadow of gloom for businesses which will be reflected in their ‘ not so encouraging dividend payouts’.
The EPF was not spared either, in tune with other large institutional funds which failed to get the same kind of returns as before, as the direction of the economy too has not changed much since the global turmoil in 2008.
Nevertheless, Malaysia’s premier retirement savings fund is still committed to its target of delivering real dividend of at least two per cent above the inflation rate over a three-year rolling period, to the relief of members.
Fortunately, EPF’s proven investment strategy had guided through its smart strategic asset allocation ( SAA) for earning decent incomes amid a tumultuous market.
The market had been affected by capital outflows into developed economies, foreign exchange volatility and geopolitical developments such as Britain’s exit from the European Union and the United States’ presidential election.
The challenging conditions too had its toll on other funds.
For instance, Permodalan Nasional Bhd’s Amanah Saham
We have to acknowledge the challenging investment environment locally and globally last year, and the trend in the recently announced dividends by PNB and Tabung Haji funds. Suhaimi Ilias, Maybank Investment Bank Group, Chief Economist
Nasional posted an income distribution of 5.00 sen per unit in 2016 compared with 6.10 sen previously.
Tabung Haji too announced a bonus of 4.25 per cent plus additional bonus of 1.5 per cent for depositors who have not performed the haj versus 2015’s bonus of 5.0 per cent and an additional haj bonus of 3.0 per cent.
Meanwhile, Maybank Investment Bank Group, Chief Economist Suhaimi Ilias, pointed to the impact of the challenging environment on businesses.
“We have to acknowledge the challenging investment environment locally and globally last year, and the trend in the recently announced dividends by PNB and Tabung Haji funds.”
In the case of EPF, he believed it has been managing expectations on this matter as it targeted to declare a dividend equivalent to two or three per cent above the inflation rate, which was 2.1 per cent last year, he told Bernama.
For Bank Islam Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid, he said: “One needs to be realistic as to how EPF investment would fare.”
He pointed out that the benchmark FBM KLCI ended 2016 at 1,641.73 points which represented a three per cent decline from end2015 while Malaysian Government Securities yields were higher across all tenors in 2016, signalling a fall in bond prices.
“Therefore, traditional asset class had faced challenging time in 2016 and that should give us an idea on what would be the dividend rate in 2016,” he explained.
Afzanizam realised that EPF has, over time, diversified its portfolio into other asset classes such as private equity, real estate and overseas investment.
Thus, he believed the strategy would reduce EPF’s portfolio risks given that traditional investment instrument were very volatile and uncertain.
“Be that as it may, EPF will continue to be prudent in its investment strategy which commensurates with its risk appetite.
“Also, it is essential for EPF to maintain sufficient buffer in order to account for the unforeseeable event that could adversely affect their investment position.
“So, we think this principle is also important to be highlighted in order to instill some form of confidence in the general public,” Afzanizam noted. — Bernama