EPF Q1 investment income jumps almost 74%

PETALING JAYA: The Employees Provident Fund's (EPF) investment income jumped 73.9% to RM11.79 billion in the first quarter (Q1) ended March 31, 2017 from RM6.78 billion in the same period a year ago, supported by significant improvement in the domestic and global markets.
Citing the 6% growth in Bursa Malaysia's FBM KLCI, driven by the banking sector, and the improvement in global indices by as much as 12%, EPF CEO Datuk Shahril Ridza Ridzuan said the positive market condition was conducive for profit-taking, leading to higher gross investment income in Q1 2017 and lower net impairment.
Net impairment fell to RM775.92 million in the quarter, from RM1.64 billion in the first quarter in 2016.
The EPF's investment assets rose 2.2% to RM747.17 billion from RM731.11 billion as at Dec 31, 2016. Out of the total, RM352.73 billion or 47.2% was in syariah-compliant investment assets and the balance in non-syariah investment assets.
Despite the encouraging performance in the first quarter, Shahril said, the EPF remains cautious as the recovery in commodity prices is still weak coupled with continued currency volatility.
Equities contributed RM7.1 billion or 60.2% of the EPF's total investment income, more than double the RM2.55 billion in the corresponding quarter in 2016 as the recovery in the banking sector contributed to about 30% of the trading and dividend income for the portfolio in Q1.
“In addition to improvement in the domestic equity market, the global market also continued to provide opportunities for the EPF to realise its gains despite volatility arising from the elections in eurozone countries, US President Donald Trump’s healthcare bill, the US interest rate hike and negotiations surrounding Brexit. These market-moving factors were alleviated by the positive economic numbers, including the revised growth forecast for major economies,” said Shahril.
The EPF’s overseas investment accounted for 29% of its total investment assets, with a 37% contribution to the total investment income recorded in Q1 2017.
As at March 2017, 49.08% of the EPF’s investment assets were in fixed-income instruments, which recorded an income of RM4.07 billion, equivalent to 34.6% of the quarterly investment income.
Income from Malaysian Government Securities & Equivalent increased 3.67% to RM1.94 billion in Q1, while income from loans and bonds was up 14.4% to RM2.14 billion.
Investments in money market instruments and real estate & infrastructure generated investment income of RM372.79 million and RM246.27 million respectively in Q1.
Following the launch of Simpanan Shariah on Jan 1, 2017, a total of RM952.1 million out of the total gross investment income of RM11.79 billion was generated for Simpanan Shariah and RM10.84 billion for conventional accounts.
Shahril said the performance of both Simpanan Shariah and Simpanan Konvensional would depend on market performance, thus making short-term differences between the two inevitable. In the long run, the performance of the two should be similar following similar strategies implemented for both accounts.
Nonetheless, the EPF remains focused on delivering a real dividend target of at least 2% above inflation over a three-year rolling period for both syariah accounts and conventional accounts.