EPF’s Q3 in­vest­ment in­come jumps 29.2%

> How­ever, a weak first-half and con­tin­ued un­cer­tain­ties likely

The Sun (Malaysia) - - SPEAK UP -

PETALING JAYA: The Em­ploy­ees Prov­i­dent Fund (EPF) saw a 29.21% growth in in­vest­ment in­come for the third quar­ter ended Sept 30, 2016 (Q3 2016), helped by con­tri­bu­tions from equity in­vest­ments, which jumped al­most 50% from a year ago.

In­vest­ment in­come for the quar­ter stood at RM12.32 bil­lion, com­pared with RM9.54 bil­lion a year ago.

In­vest­ment as­sets recorded an in­crease of 4.09% to RM712.50 bil­lion from RM684.52 bil­lion as at Dec 31, 2015.

“Given the over­all poor per­for­mance in the third quar­ter of 2015, the im­proved year-on-year per­for­mance in Q3 2016 is ac­cen­tu­ated by a low base. None­the­less, most equity markets recorded an im­prove­ment re­sult­ing in out­per­for­mance in the third quar­ter this year com­pared with the cor­re­spond­ing quar­ter last year,” EPF CEO Datuk Shahril Ridza Ridzuan said in a state­ment yes­ter­day.

He, how­ever, said the EPF re­mains cau­tious as un­cer­tain­ties, fur­ther ex­ac­er­bated by the out­come of the US pres­i­den­tial elec­tion, loom large over the per­for­mance of global and regional markets as well as against emerg­ing mar­ket cur­ren­cies.

“Al­though this is likely to re­sult in for­eign ex­change gains in the cur­rent year for the EPF’s in­vest­ments, mov­ing for­ward, the EPF’s cost for over­seas in­vest­ment will in­crease as in­vest­ments will be at higher for­eign ex­change rates,” said Shahril.

He said the low in­ter­est rate en­vi­ron­ment will also con­tinue to re­duce the re­turn from its fixed-in­come in­vest­ment as ma­tur­ing higher yield­ing bonds will be rein­vested at the pre­vail­ing low in­ter­est rate.

“Given the de­cline in in­vest­ment in­come in the first half of the year and the un­cer­tain­ties that are ex­pected to re­main for the rest of the fi­nan­cial year, it would be a chal­lenge for the EPF to sus­tain pre­vi­ous years’ re­turns,” he added.

Shahril said the EPF will con­tinue to be guided by its long-term in­vest­ment strat­egy through the Strate­gic As­set Al­lo­ca­tion, which has fac­tored in shortto medium-term volatil­ity in the mar­ket such as the US pres­i­den­tial elec­tion out­come. The pen­sion fund also re­mains fo­cused on de­liv­er­ing real div­i­dend tar­get of at least 2% above in­fla­tion over a three-year rolling pe­riod.

In a re­view of its per­for­mance for the quar­ter, the EPF said non-cash im­pair­ments stood at RM349.59 mil­lion, an im­prove­ment from the RM1.02 bil­lion re­ported a year ago.

Eq­ui­ties, which made up 41.24% of the EPF’s to­tal in­vest­ment as­sets, contributed RM7.02 bil­lion in Q3 2016, rep­re­sent­ing 56.96% of to­tal in­vest­ment in­come for the quar­ter, a 49.02% growth from the RM4.71 bil­lion recorded a year ago.

Shahril at­trib­uted the in­crease in in­come to the im­prove­ments in equity prices mainly in the North Asian and de­vel­oped markets, which pro­vided op­por­tu­ni­ties for the EPF to realise higher trad­ing in­come.

As at Septem­ber 2016, a to­tal of 49.76% of the EPF’s in­vest­ment as­sets were in fixed-in­come in­stru­ments. Fixed-in­come in­vest­ments gen­er­ated RM4.52 bil­lion dur­ing the quar­ter, equiv­a­lent to 36.65% of the quar­terly in­vest­ment in­come.

In Q3 2016, in­come from Malaysian Gov­ern­ment Se­cu­ri­ties and equiv­a­lent rose 7.21% to RM1.95 bil­lion from RM1.82 bil­lion a year ago while loans and bonds gen­er­ated an in­vest­ment in­come of RM2.56 bil­lion com­pared with RM2.54 bil­lion a year ago.

In­vest­ments in Money Mar­ket In­stru­ments, which rep­re­sented 5.19% of to­tal in­vest­ment as­sets, contributed in­vest­ment in­come of RM295.66 mil­lion dur­ing the quar­ter.

Mean­while, in­vest­ments in real es­tates and in­fras­truc­ture, which rep­re­sented 3.8% of to­tal in­vest­ment as­sets, contributed in­vest­ment in­come of RM478.22 mil­lion dur­ing the quar­ter. This as­set class pro­vides the EPF with in­fla­tion-linked re­turns in order to achieve real div­i­dend tar­get of 2% above in­fla­tion.

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