KUALA LUMPUR (Dec 19): The Employees Provident Fund (EPF) reported today total investment income increased 12.82% to RM14.61 billion in the third quarter ended Sept 30, 2018 (3Q18) from RM12.95 billion a year earlier, as Malaysian and ASEAN equities recovered while developed market stocks continued to record positive growth.
In a statement today, the EPF said that during 3Q18, dividend income had enhanced the performance of the domestic equity portfolios.
"In 3Q18, equities, which made up 40.67% of the EPF's total investment assets, had continued to be the main revenue driver, contributing RM8.89 billion, which is equivalent to 60.81% of total investment income, for the quarter," the EPF said.
EPF deputy chief executive officer (investment) Datuk Mohamad Nasir Ab Latif said in the statement: "3Q18 saw us navigating a volatile market condition, which has been fuelled by the trade tensions between China and the United States. However, we have been able to record an improvement in income as Malaysia and ASEAN equities recovered in 3Q18 from the market downturn experienced in previous quarters, while developed market equities continued to record positive growth from previous quarter."
Mohamad Nasir said volatility is increasingly felt across the region, in which the EPF saw a decline in regional equity markets in 4Q18. He said this will certainly pose a huge challenge to the EPF to sustain the same income momentum for 4Q18.
"Going forward, we remain cautious of the uncertain external environment such as the continued US-China trade tensions, weaker commodity prices and the US interest rate hike as well as the challenging domestic equities market. Meanwhile, we are grateful for the support of the Ministry of Finance and Bank Negara Malaysia towards the EPF's long-term global diversification efforts, which will greatly assist the EPF towards delivering its strategic targets of at least 2.5% nominal dividend and 2.0% real dividend on a rolling three-year basis," he said.
The EPF also invests in fixed-income instruments, real estate and infrastructure besides money markets.
According to the EPF's statement, 50.72% of its investment assets were in fixed-income instruments, which include Malaysian Government Securities (MGS). The EPF said fixed-income instruments continue to provide consistent and stable income, reduce overall risk and protect the fund's portfolio against volatility.
The EPF said income from MGS and equivalent in 3Q18 increased to RM2.5 billion. Loans and bonds generated an investment income of RM2.24 billion.
"During the quarter under review, real estate & infrastructure recorded RM726.23 million in investment income, an increase from RM91.73 million during the same quarter last year. The marked increase was due to higher dividend income, compared with the same period last year.
"Investments in money market instruments, which represent 3.92% of the total investment assets, contributed RM265.39 million to the investment income. Investment in this asset class, which includes treasury bills, commercial papers, short-term certificates of deposit, repurchase agreements, etc, provides regular income payments and is vital in meeting the EPF's short-term liquidity needs," the EPF said.