KUALA LUMPUR, 30 May 2017: The Employees Provident Fund (EPF) today reported a quarterly investment income of RM11.79 billion for the first quarter ending 31 March 2017 (Q1 2017), a year-on-year increase of 73.9 per cent from RM6.78 billion in Q1 2016.
Commenting on EPF’s Q1 2017 Investment performance, Chief Executive Officer Datuk Shahril Ridza Ridzuan said, “Both the domestic and global markets improved significantly compared with the first quarter last year. The FBM KLCI grew by six (6) per cent, driven by the growth in the banking sector, while global indices improved by as much as 12 per cent, a striking difference from the market environment last year. The positive market condition was conducive for profit taking activities leading to higher gross investment income in Q1 2017 and also lower net impairment.”
In accordance with the Malaysian Financial Reporting Standards (MFRS 139), the EPF recorded lower net impairments from RM1.64 billion to RM775.92 million this year, a decrease of RM865.08 million, following the improvement in all major markets.
The value of EPF investment assets reached RM747.17 billion, a 2.20 per cent or RM16.06 billion increase from 31 December 2016. Out of the total investment asset, RM352.73 billion, or 47.2 per cent, were in Shariah-compliant investment while the balance were invested in non-Shariah assets.
“While we have had an encouraging first quarter, we remain cautious moving forward as recovery in commodity prices remains weak with continued currency volatility,” said Datuk Shahril.
In Q1 2017, Equities, which made up 41.76 per cent of the EPF’s total investment assets, contributed RM7.10 billion, representing 60.2 per cent of total investment income for the quarter. This was 178.6 per cent higher from the RM2.55 billion recorded in the corresponding quarter in 2016. The recovery in banking sectors contributed to about 30 per cent of the trading and dividend income for the portfolio during the quarter.
“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 volatilities arising from the elections in eurozone countries, President 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.”
The EPF’s overseas investment accounted for 29 per cent of its total investment asset and contributed 37 per cent to the total investment income recorded in Q1 2017.
As at March 2017, a total of 49.08 per cent of EPF’s investment assets were in fixed income instruments, which continue to provide consistent and stable income. The first quarter saw fixed income investments recorded an income of RM4.07 billion, equivalent to 34.6 per cent of the quarterly investment income.
Income from Malaysian Government Securities (MGS) & Equivalent in Q1 2017 increased 3.67 per cent, or RM68.56 million, to RM1.94 billion from RM1.87 billion in Q1 2016. Loans and Bonds, meanwhile, generated an investment income of RM2.14 billion, compared with RM1.87 billion in Q1 2016.
Investments in Money Market Instruments and Real Estates & Infrastructure each represented 5.04 per cent and 4.11 per cent of the total investment assets, and contributed investment income of RM372.79 million and RM246.27 million respectively in Q1 2017.
Following the commencement of Simpanan Shariah on 1 January 2017, a total of RM952.10 million out of the total gross investment income of RM11.79 billion was generated for Simpanan Shariah while RM10.84 billion for Simpanan Konvensional. Simpanan Shariah derives its income solely from its portion of the Shariah assets while the income for Simpanan Konvensional is generated by its share of Shariah and also non-Shariah assets.
Datuk 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.
He added that the EPF remains focused on delivering real dividend target of at least two (2) per cent above inflation over a three-year rolling period for both Simpanan Shariah and Simpanan Konvensional.
About the Employees Provident Fund (EPF)
The Employees Provident Fund (EPF) is Malaysia’s premier retirement savings fund to help its members achieve adequate savings for a comfortable retirement. This is in line with EPF’s vision to help members achieve a better future and the mission to safeguard members’ savings and deliver excellent services. The EPF has evolved significantly from transaction-centric to a professional fund management organisation with a strong focus on retirement security. The EPF is guided by a robust and professional governance framework when making investment decisions. It continues to play a catalytic role in the nation’s economic growth and seeks to cultivate a savings and investment culture among its members to improve the country’s financial literacy level.