EPF’s 2Q total investment income rises 7.64 pct to RM12.39 billion

KUALA LUMPUR: The Employees Provident Fund’s (EPF) total investment income for the second quarter ended June 30, 2018 rose 7.64 per cent to RM12.39 billion from the RM11.51 billion recorded in the same period last year.

Deputy chief executive officer ( investment) Datuk Mohamad Nasir Ab Latif said the pension fund’s diversification into different markets and sectors enabled it to record a consistent performance, with equities emerging as the main contributor in the second quarter, despite a less favourable trading environment in the domestic market.

He said the escalating United States-China trade tensions and US interest rate hike contributed to capital outflows from emerging markets, including Malaysia.

“While some developed markets, including the US and Eurozone countries, recorded gains in their equity markets, the emerging markets, which includes Asia, recorded negative returns,” he added.

He said with Asean being one of the worst performers, Malaysia was not excluded from the market downturn.

Mohamad Nasir also said equities made up 40.61 per cent of the EPF’s total investment assets in the second quarter, contributing RM7.98 billion and representing 64.44 per cent of total investment income for the period.

“A total of 52.09 per cent of EPF’s investment assets were in fixed income instruments, which continue to provide consistent and stable income,” he said.

He said the second quarter saw fixed income investments record RM4.09 billion, equivalent to 33.07 per cent of the quarterly investment income.

Other contributors to the investment income were Malaysian Government Securities (MGS) and equivalent (RM2.40 billion), loans and bonds (RM1.70 billion), money market instruments (RM215.44 million), real estate and infrastructure (RM91.73 million).

He said the real estate and infrastructure asset class continued to provide the EPF with an inflation hedged return with more income expected to come in the later part of the year.

He added that overseas investments, which accounted for 26.50 per cent of EPF’s total investment assets, contributed 38.30 per cent to the total investment income during the quarter under review.

Mohamad Nasir said the value of EPF investment assets reached RM813.18 billion, up 0.38 per cent or RM3.05 billion from December 31 last year, but a marginal decline from the first quarter of 2018, due to the drop in equity markets.

“Notwithstanding the quarterly decline, the EPF’s asset position remains healthy compared to members’ savings balance of RM780.07 billion,” he said.

He said of the total investment assets, RM322.89 billion or 39.71 per cent, were in Shariah-compliant investments, with the balance invested in the conventional portfolio.

“A total of RM1.09 billion out of the RM12.39 billion gross investment income, was generated for Shariah Saving and RM11.30 billion for Conventional Saving,” he added.

Mohamad Nasir said in accordance with implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9), effective Jan 1 this year, capital gains on disposal of equity amounting to RM3.79 billion for the second quarter would flow directly to retained earnings from the statement of other comprehensive income.

He said this is as opposed to the statement of profit or loss under the previous financial reporting standard.

He added that under MFRS 9, the EPF would also no longer recognise any impairment on its equity holdings.

On outlook, Mohamad Nasir said the domestic investment environment is likely to turn favourable in the second half of this year, with an easing of foreign outflows and clearer policy direction from the new government.

However, he noted that the global investment environment outlook would be shrouded by the continued political and policy risks such as the impending changes to monetary policies, uncertainty over the outcome of Brexit and the ongoing trade tensions between major trading nations.

Nevertheless, he said the EPF remained focus on delivering above- inflation returns, of at least two per cent above the inflation rate over a three-year rolling period, which would preserve and enhance the value of members’ retirement savings. — Bernama