KUALA LUMPUR: The Employees Provident Fund’s (EPF) investment income jumped 73.9% to RM11.79 billion in the first quarter ended March 31, 2017 (1QFY17) from RM6.78 billion a year ago, thanks to significant improvements in the domestic and global markets.
“The FBM KLCI grew by 6%, driven by the growth in the banking sector, while global indices improved by as much as 12%, 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 1Q[FY17] and also lower net impairment,” said EPF chief executive officer (CEO) Datuk Shahril Ridza Ridzuan in a statement yesterday.
Net impairments fell 52.7% to RM775.92 million in the quarter compared with RM1.6 billion a year ago, following improvements in major markets.
The value of EPF’s investment assets climbed 2.2% or RM16.06 billion to RM747.17 billion from Dec 31, 2016. Of the total, RM352.7 billion or 47.2% is now syariah-compliant investments.
Moving forward, EPF will remain cautious despite the encouraging 1QFY17, said Shahril, as recovery in commodity prices remains weak with continued currency volatility.
Equity, which makes up 41.7% of its total investment assets, rose 178.6% to contribute RM7.1 billion or 60.2% of its 1QFY17 total investment income, from RM2.55 billion a year ago. The EPF said recovery in the banking sector resulted in a 30% contribution to the trading and dividend income of the portfolio in 1QFY17.
Overseas investment, which makes up 29% of its total investment assets, contributed 37% of the fund’s invesment income in 1QFY17.
Shahril said further to the domestic equity market recovery, the global market also enabled the EPF to realise its gains despite volatilities from elections in eurozone countries, the US healthcare bill and interest rate hike as well as Brexit.
“These market-moving factors were alleviated by positive economic numbers, including the revised growth forecast for major economies,” he said.
As at March 2017, EPF had invested 49.08% in fixed-income instruments that recorded an income of RM4.07 billion, equivalent to 34.6% of its quarterly investment income.
Income from its investments in “Malaysian Government Securities & equivalent” rose 3.67% year-on-year to RM1.94 billion from RM1.87 billion, while “loans and bonds” generated a 14.4% higher income of RM2.14 billion compared with RM1.87 billion in 1QFY16.
Investments in both money-market instruments and real estates & infrastructure garnered an income of RM372.79 million and RM246.27 million, respectively, during the quarter. Money-market instruments made up 5.04% of total investment assets, while real estates & infrastructure took up 4.11%.
The EPF said RM952.1 million out of its total gross investment income of RM11.79 billion for the quarter was generated for Simpanan Shariah that started on Jan 1, while RM10.84 billion went to Simpanan Konvensional
Simpanan Shariah derives its income solely from its portion of the syariah assets while the income for Simpanan Konvensional is generated by its share of syariah and non-syariah assets, it said.
Shahril said both the performance of 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. We remain focused on delivering real dividend target of at least 2% above inflation over a three-year rolling period for both Simpanan Shariah and Simpanan Konvensional,” he added.