KUALA LUMPUR: The Employees Provident Fund (EPF) reported a total investment income of RM13.50bil in the third quarter ended Sept 30,2019, where nearly half of the income was from equities.
In a statement issued on Friday, the country's premier retirement savings fund said its income was affected by an uncertain and volatile market that has worsened since 2018.
Of the RM13.50bil in investment income in the 3Q 2019, equities accounted for RM7.47bil, fixed income instruments (RM5.33bil), money market instruments (RM450mil) and real estate & infrastructure (RM250mil).
The EPF also pointed out that a total of RM1.30bil out of the RM13.50bil gross investment income was generated for Simpanan Shariah, and RM12.20bil for Simpanan Konvensional.
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.
To recap, the EPF had for the 2Q ended June 30,2019 reported total investment income of RM12.32bil compared with the RM12.39bil a year ago.
On the 3Q 2019 performance, EPF deputy CEO (Investment) Datuk Mohamad Nasir Ab Latif explained the EPF’s domestic equity portfolio was affected by the weak earnings growth in the domestic equity market that in turn saw the Malaysian stock market declining 5.3%. For 3Q 2019, the portfolio recorded an income of RM2.57bil.
“Weakening market conditions coupled with the uncertainties arising from the US-China trade war, the ongoing uncertainty over a Brexit deal, political instability in Hong Kong and geo-political tensions in the Middle East contributed to the volatility.
“Emerging markets continued to feel the heat from the escalating US-China trade war. Asian markets remained volatile, with Hong Kong’s stock market being the weakest. In ASEAN, Singaporean and Thai equity markets underperformed, Indonesia’s came under pressure from a strong US dollar while China’s market was only prevented from weakening further by Beijing’s stimulus measures.
“We had to work through a challenging market environment, including a weakening KLCI. Fortunately, our diversified portfolio, which includes investment income from overseas assets, helped mitigate some of the impact, ” Nasir said.
He added that the deteriorating trade conditions not only affected equity markets but also caused the global economic slowdown, with export-reliant nations in the region such as Malaysia, Singapore and Thailand being the most impacted. As a result, consumer confidence also declined, with Malaysia’s falling to the lowest since 4Q 2017 on lower purchasing power and a weak job outlook.
“The rising geo-political risks are expected to continue to add pressure on the global economy. We are cautious about the Malaysian economy’s growth outlook. If trade tensions between the US and China continue, there will be knock-on effects on trade-dependent economies like ours.”
He noted that 2019 has been a difficult year and that near-term market uncertainties will continue to persist, which will affect the capital markets.
“The EPF’s performance reflects these uncertainties and our outlook for the market remains cautious and prudent, ” he said.
Still, Nasir assured the EPF will continue to leverage on the good buying opportunities that will arise during any market downturn.
“Volatility also provides EPF with an opportunity as we are always on the lookout for assets with sound fundamentals and good cash flow that can add long-term value to our portfolio. As a long-term fund, our concern has always been to achieve long-term results, ” Nasir said.
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