KUALA LUMPUR: The Employees Provident Fund Board (EPF) recorded lower investment income of RM12.32bil in the second quarter ended June 30,2019 due to the weaker equities market sentiment.
It said in a statement on Friday, the income was down by RM70mil from the RM12.39bil a year ago and cautioned market conditions for the rest of the year will continue to be extremely challenging and volatile.
The EPF said equities, making up 39.2% of total investment assets, contributed RM6.33bil or 51.4pct of total investment income in Q2.
EPF deputy chief executive officer (investment) Datuk Mohamad Nasir Ab Latif attributed the lower earnings mainly down to the weak performance of the Malaysian stock market (-1.1% in Q2 2019 from a year ago), which resulted in the EPF’s domestic equity portfolio recording an income of RM1.51bil.
A total of 50.6% of EPF’s investment assets were in fixed income instruments, which continue to provide a consistent and stable flow of income, returning RM5.12bil, equivalent to 41.6% of the quarterly investment income.
Income from Malaysian Government Securities (MGS) & Equivalent in Q2 2019 reached RM2.69bil, while Loans and Bonds generated an investment income of RM2.43bil.
Real Estate & Infrastructure, representing 4.9% of total investment assets, recorded RM460mil in investment income.
Investments in Money Market Instruments, which represent 5.3% of total investment assets, contributed RM410mil.
A total of RM890mil out of the RM12.32bil gross investment income was generated for Simpanan Shariah, and RM11.43bil for Simpanan Konvensional.
The EPF pointed out Simpanan Shariah derives its income solely from its portion of the Shariah portfolio while income for Simpanan Konvensional is generated by a share of both the Shariah and conventional portfolios.
On the outlook for the remaining quarters of the year, Mohamad Nasir cautioned that “We think market conditions for the rest of the year will continue to be extremely challenging and volatile.
“There are a lot of uncertainties, especially around Brexit, the ongoing US-China trade dispute, and growing protectionism in other countries such as Japan and South Korea.
“We are also keeping a close eye on the possibility of an economic slowdown and the rising risk of recession in major economies, which may have a knock-on effect on global growth.
“Market conditions in Malaysia remain challenging over the short term, but provide good buying opportunities for long term funds such as ours. Heading into the end of the year, we believe it will be very difficult for us to maintain the first half momentum as we are seeing worrying trends emerging in many global indicators.
“Despite this outlook, we remain firmly confident in our ability to deliver above-inflation returns, meeting our objective of preserving and enhancing the value of our members’ savings over the long term.”