Date: 09 Sep 2016
EPF Records RM8.44 Billion Income For Q2 2016

Fund takes prudent stance due to global uncertainties


KUALA LUMPUR, 9 September 2016: The Employees Provident Fund (EPF) today reported a quarterly investment income of RM8.44 billion for second quarter (Q2 2016) ending 30 June 2016, a year-on-year decline of 26.04 per cent from RM11.41 billion in Q2 2015. Investment assets recorded an increase of 0.76 per cent, or RM5.17 billion, to RM689.69 billion from RM684.52 billion as at 31 December 2015.


In announcing the EPF’s Q2 2016 investment performance, Chief Executive Officer Datuk Shahril Ridza Ridzuan said, “Since last year, the EPF has been preparing itself for a challenging global and domestic environment. The global and domestic economic uncertainty we anticipated was made worse by developments such as Brexit and continued low commodity prices.  We 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.”


Adopting prudent measures under the international accounting standards IAS 39, 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 for Q2 2016 was RM12.07 billion, which was RM233.95 million higher compared with RM11.83 billion recorded in Q2 2015. However, as a prudent fund, we recognised mark-to-market losses on our income statement while leaving gains on our balance sheet.


“This will ensure our balance sheet remains healthy and allow us to take advantage of any market recovery. Impairments to present market values will give us the opportunity to realise gains in the future,” said Datuk Shahril.


In Q2 2016, Equities, which made up 40.94 per cent of the EPF’s total investment assets, contributed RM3.83 billion, representing 45.37 per cent of the total income for the quarter.  This was 45.03 per cent 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 per cent of EPF’s investment assets were in fixed income instruments which continued to provide consistent and stable income to moderate the impact of the year-on-year decline in the equities market.  The second quarter saw fixed income investments recording an income of RM4.07 billion, equivalent to 48.27 per cent of the quarterly income.


Income from Malaysian Government Securities (MGS) & Equivalent in Q2 2016 increased 9.48 per cent, or RM169.45 million, to RM1.96 from RM1.79 billion in Q2 2015.  Loans and Bonds, meanwhile, generated an investment income of RM2.12 billion, compared with RM2.02 billion in Q2 2015. 


Investments in Money Market Instruments and Real Estates and Infrastructure each represented 3.87 per cent and 3.59 per cent of the total investment assets and contributed investment income of RM239.32 million and RM294.83 million respectively in Q2 2016.


“We remain cautious in our outlook as we anticipate global uncertainties to continue following the lowered forecasts on 2016 and 2017 global growth by the International Monetary Fund (IMF), 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.


“The low interest rate environment caused by central bank rate cuts to spur the economy is expected to stay for a while and will pose a challenge as more than half of our investments are in fixed income instruments. The recent reduction in domestic interest rates will also affect our long term income on domestic instruments,” Datuk Shahril said.


“Nonetheless, we remain focused on our long-term investment objectives of preserving and enhancing the value of our members’ savings. This will be done by targeting a real dividend of at least two (2) per cent above inflation calculated over a three-year rolling period.”

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.