EPF in­vest­ments in US will be in­come ac­cre­tive to the fund — Econ­o­mists

The Borneo Post - - NATIONAL -

KUALA LUMPUR: The Em­ploy­ees Prov­i­dent Fund’s (EPF) move to in­crease its in­vest­ments in the United States (US) by be­tween US$3 bil­lion (US$1=RM4.18) and US$4 bil­lion for in­fra­struc­ture projects would be in­come ac­cre­tive to the fund, which would trans­late into bet­ter div­i­dends.

Bank Is­lam Malaysia Bhd Chief Econ­o­mist, Dr Mohd Afzanizam Abdul Rashid, said in­fra­struc­ture spend­ing was one of the im­por­tant growth agen­das for the US, given the cur­rent state of its in­fra­struc­ture which are rather old and in dire need of rein­vest­ments.

“We be­lieve that this is a pos­i­tive move for the EPF as it is part of their in­vest­ment strat­egy to di­ver­sify their port­fo­lio ge­o­graph­i­cally.

“And we also be­lieve such de­ci­sion will be based on their strate­gic as­set al­lo­ca­tion (SAA), and there will be spe­cific tar­gets for each as­set class that is also de­pen­dent on risk tol­er­ance,” he told Ber­nama in an email in­ter­view.

He pointed out that this was a cal­cu­lated risk, as large in­sti­tu­tional in­vestors, such as EPF, would re­sort to SAA when it came to mak­ing de­ci­sions re­gard­ing their in­vest­ments.

The pen­sion fund had de­clared a div­i­dend rate of 5.70 per cent for 2016, with a to­tal pay­out of RM37.08 bil­lion, com­pared with the 6.4 per cent in 2015.

Mohd Afzanizam was com­ment­ing on Prime Min­is­ter Datuk Seri Na­jib Tun Razak’s re­cent an­nounce­ment on EPF and Khaz­anah Na­sional Bhd’s plans to ex­pand their in­vest­ments in the US.

Na­jib had also an­nounced Malaysia Air­lines Bhd’s de­ci­sion to pur­chase 16 Boe­ing air­craft in the near fu­ture.

To-date, the EPF had in­vested close to US$7 bil­lion in terms of eq­uity in the US, while Khaz­anah Na­sional, which has an of­fice in the Sil­i­con Val­ley, Cal­i­for­nia, had in­vested about US$400 mil­lion in high tech­nol­ogy com­pa­nies.

Over­seas in­vest­ments ac­counted for about 29 per cent of the EPF’s to­tal in­vest­ment as­sets of RM731.11 bil­lion.

In Fe­bru­ary this year, EPF Chief Ex­ec­u­tive Of­fi­cer, Datuk Shahril Ridza Ridzuan, said the pen­sion fund was ac­tively look­ing for more in­vest­ment op­por­tu­ni­ties over­seas, as in­come from for­eign as­sets was sig­nif­i­cant to­wards its per­for­mance.

He also em­pha­sised the need to look for more in­ter­est­ing op­por­tu­ni­ties glob­ally to coun­ter­bal­ance the im­pact of lower re­turns from the lo­cal eq­uity mar­ket.

Mean­while, the an­nounce­ment on the ad­di­tional in­vest­ments by Malaysia had come at the right time as the US econ­omy has been grow­ing at a healthy clip, with its se­cond-quar­ter gross do­mes­tic prod­uct ris­ing by 3.0 per cent from 1.4 per cent pre­vi­ously and eq­uity prices record­ing mul­ti­ple highs dur­ing the year.

Busi­ness and con­sumer sen­ti­ments in the world’s largest econ­omy were also im­prov­ing, with the US man­u­fac­tur­ing in­dex ris­ing to 58.8 and Con­sumer Con­fi­dence In­dex ris­ing to 122.9 in Au­gust.

No­tably, the US Fed­eral Re­serve (Fed) had raised the Fed Fund Rate by 100 ba­sis points since De­cem­ber 2015.

“The US econ­omy is on firmer foot­ing as the mon­e­tary stim­u­lus has been grad­u­ally re­moved. So, Malaysia is in­vest­ing at a point when the US econ­omy is im­prov­ing.

“Per­haps the tim­ing is right, con­sid­er­ing that their na­ture of in­vest­ment are go­ing to be long term,” said Mohd Afzanizam. — Ber­nama

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