EPF posts RM8b investment income in Q2, remains cautious

KUALA LUMPUR: The Employees Provident Fund (EPF) reported an investment income of RM8.44 billion for the second quarter ended June 30, 2016 (Q216), a drop of 26.04% from RM11.41 billion in Q215.
Investment assets recorded an increase of 0.76% or RM5.17 billion, to RM689.69 billion from RM684.52 billion as at Dec 31, 2015.
EPF CEO Datuk Shahril Ridza Ridzuan said since late last year, the EPF has been preparing itself for a challenging global and domestic environment. The uncertainty was made worse by developments such as Brexit and continued low commodity prices.
“We have seen and expect a further slowdown in global economies and increased volatility in equities. Markets saw lower valuations in share prices, particularly in the financial and oil and gas sectors, compared to the same quarter last year,” he said in a statement last Friday.
Shahril said EPF remains cautious in its outlook as it anticipates global uncertainties to continue following the lowered forecasts on 2016 and 2017 global growth by the International Monetary Fund, and the subdued outlook in emerging and developing economies with the upcoming US presidential elections and further risks associated with Brexit that have yet to unfold.
“Nonetheless, we remain focused on our long-term investment objectives of preserving and enhancing the value of our members’ savings,” said Shahril.
Adopting prudent measures under the international accounting standards IFRS 139, the EPF recognised non-cash impairments amounting to RM3.58 billion on its listed equity investments during the quarter under review, reflecting lower equity prices from a year ago.
“On a gross basis, the quarterly investment income in Q216 was RM12.07 billion, which was RM233.95 million higher compared with RM11.83 billion recorded in Q215. However, as a prudent fund, we continue to recognise mark-to-market losses on our income statement while leaving gains on our balance sheet.
“This will ensure that our balance sheet remains healthy and allows us to take advantage of any market recovery. Impairments to present market values will allow us the opportunity to realise gains in the future,” said Shahril.
In Q216, equities, which made up 40.94% of the EPF’s total investment assets, contributed RM3.83 billion, representing 45.37% of the total income in the quarter. This was 45.03% lower from RM6.97 billion recorded in the corresponding period in 2015.
However, gross income before impairment from listed equities was RM7.46 billion, marginally higher than RM7.39 billion during the same period last year.
As at June 2016, a total of 51.61% of the EPF’s investment assets were in fixed income instruments which continued to provide consistent and stable income. The second quarter saw fixed income instruments recording an income of RM4.07 billion or 48.27% of the quarterly total.
Income from Malaysian Government Securities and equivalent in Q216 rose 9.48%, or RM169.45 million, to RM1.96 billion from RM1.79 billion in Q215. Loans and bonds, meanwhile, generated an investment income of RM2.12 billion, against RM2.02 billion in Q215.
Investments in money market instruments and real estates and infrastructure each represented 3.87% and 3.59% of the total investment assets and contributed investment income of RM239.32 million and RM294.83 million respectively in Q216.