KUALA LUMPUR: The Employees’ Provident Fund’s (EPF) dividend rate is highly dependent on the state of the global economy and volatility in the financial markets, said market observers.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid(pic) said the dividend rate of 5.45% for Simpanan Konvensional and 5% for Simpanan Shariah for 2019 were respectable returns considering that the global economic environment had been so uncertain.
“One should be realistic in expecting the dividend rates for 2020.
“Last year, trade protectionist policies had been so rampant particularly between the US and China, as well as in other jurisdictions such as Europe, Japan, and South Korea. Uncertainties over Brexit also caused investors to remain guarded alongside the volatility in the commodities markets, ” he told Bernama.
Mohd Afzanizam added that a sizeable exposure to fixed income markets would ensure that the EPF would receive a stable income stream, while at the same time, allow some upside potential in view of lower interest rate environment that can provide capital gain as interest rates and bond prices are inversely related.
Fixed income instruments accounted for 49% of the EPF’s total assets, while a 39% allocation in equities would ensure that the retirement fund would stand to gain should equities gain traction when the economy recovers.
Meanwhile, the Institute for Democracy and Economic Affairs research manager Lau Zheng Zhou said 2020 would be as challenging as 2019 due to a lack of impetus for economic growth, as demonstrated by the continuous fall in private and public investments.
Investor confidence, particularly foreign, would also remain weak due to the domestic situation, he added.
“Also, we have just entered into 2020 when Covid-19 happened, and we are still not sure how big the implications are. But, given its more conservative portfolio, the EPF should still be able to generate healthy returns, ” he told Bernama.
Lau noted that the EPF had rightly pointed out that it has to increase exposure abroad.
The Malaysian Institute of Economic Research chairman Tan Sri Dr Kamal Salih said amidst the tough economic environment, both market sentiment and corporate earnings were affected, while financial institution managers such as the EPF were unable to act more positively in terms of declaring dividends.
“We have to be cautious, and as for now, foreign investors will have to continue to wait for the resolution of a possible realignment of the country’s political landscape, ” he said.
Moving forward, MIER’s study found that the impact of Covid-19 outbreak on Malaysia’s economy was still small, mainly on the tourism sector and export-oriented manufacturing.
“It could get worse if the outbreak persists (and) will affect Visit Malaysia Year 2020. But the government is managing Covid-19 situation well, ” he added. — Bernama
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