EPF’s RM31.5bil impact on the capital market

CGS-Cimb Research: “EPF withdrawal schemes had seen take-up rates of 52% to 82%, based on our estimates. As such, based on the Finance Ministry’s estimates to parliament of RM63bil and assuming a 50% take-up rate, we project the potential withdrawal value to be RM31.5bil."

PETALING JAYA: The Employees Provident Fund (EPF) special RM10,000 withdrawal scheme is expected to have a RM31.5bil impact on the bond and equity markets.

This, according to CGS-CIMB Research’s estimates, is based on the assumption that take-up rates will be similar to the previous EPF withdrawal schemes of around 80%.

“EPF withdrawal schemes had seen take-up rates of 52% to 82%, based on our estimates. As such, based on the Finance Ministry’s estimates to parliament of RM63bil and assuming a 50% take-up rate, we project the potential withdrawal value to be RM31.5bil.

“This could impact fund flows for Malaysia where we see potentially higher net selling from local institutional funds due to the requirement to raise liquidity for the potential withdrawals,” the research house added.

Year-to-date, it noted that local institutional investors have been the largest net sellers of Malaysia equities with a net selling flow of RM5.6bil, against RM12.1bil in 2021.

It noted that the special EPF withdrawal scheme would help boost consumer spending ahead of the Hari Raya celebrations in May.

Meanwhile, AmInvestment Bank Research said the potential beneficiaries to the latest EPF withdrawal scheme are the consumer, travel and healthcare sectors.

The sectors will benefit from the higher domestic consumer spending ahead of the festive season and the reopening of the country’s borders next month, it said.

“In the consumer space, our top picks are Berjaya Food Bhd, Bonia Corp Bhd and QL Resources Bhd. We also like Malaysia Airports Holdings Bhd as a border reopening play,” AmInvestment Bank Research said.

“The withdrawal would affect the sector positively as additional liquidity will likely trickle down, spurring demand for consumer goods and provide further support to consumer spending in the near term. Nevertheless, the impact is likely to be softer compared with previous withdrawals,” it added.

This is as the economy has reopened and the number of contributors that are still struggling economically from the pandemic may have reduced while others might want to avoid unnecessary withdrawals from their retirement savings.

“After several withdrawals in the past two years, consumers may need some time to replenish their savings. Hence there would not be as many withdrawals this time around,” the research house said.

According to the EPF, 7.3 million contributors had withdrawn RM101bil during the three previous schemes since the Covid-19 pandemic hit the country.

AmInvestment Bank Research said it maintained its “overweight” stance on the sector as its revenue is driven by the domestic demand.

“Hence it would be relatively shielded from the impact of geopolitical conflicts.

“The ongoing pick-up in economic activities will continue to benefit the sector. Our top ‘buy’ calls are MR DIY Group (M) Bhd with a fair value of RM4.45 and Guan Chong Bhd with a fair value of RM3.40. We also have a ‘buy’ call on Berjaya Food with a fair value of RM3.30,” the research house said.