KUALA LUMPUR (Sept 6): The Employees Provident Fund (EPF) today reported total investment income of RM12.32 billion for the second quarter ended June 30, 2019 (Q2 2019), RM70 million less than the RM12.39 billion recorded in the corresponding quarter last year.
EPF deputy chief executive officer (investment) Datuk Mohamad Nasir Ab Latif put the lower earnings mainly down to the weak performance of the Malaysian stock market (-1.1 percent in 2Q 2019 compared with the same period last year), which resulted in the EPF’s domestic equity portfolio recording an income of RM1.51 billion.
Most global equity markets, however, saw a recovery from the lows seen in 4Q 2018, partly due to some indications of progress in the US-China trade talks, steadying the income contribution from international equities.
Nonetheless, with the exception of the US, many major markets remained below their peaks in 2018, and trading conditions were difficult in 2Q 2019.
“The benefit of having a diversified portfolio is that the investment income from overseas assets helped to cushion the decline in income from the domestic equity portfolio.
“For us at the EPF, the short-term volatility gave us a chance to buy good assets to strengthen the portfolio for the long term,” said Mohamad Nasir in a statement.
Equities, which made up 39.2 percent of the EPF’s total investment assets, continued to be the main revenue driver, contributing RM6.33 billion, equivalent to 51.4 percent of total investment income, for 2Q 2019.
A total of 50.6 percent of EPF’s investment assets were in fixed income instruments, which continue to provide a consistent and stable flow of income, returning RM5.12 billion, equivalent to 41.6 percent of the quarterly investment income. Income from Malaysian Government Securities (MGS) and equivalent in Q2 2019 reached RM2.69 billion, while Loans and Bonds generated an investment income of RM2.43 billion.
During the quarter under review, Real Estate and Infrastructure, representing 4.9 percent of total investment assets, recorded RM460 million in investment income. Investments in Money Market Instruments, which represent 5.3 percent of total investment assets, contributed RM410 million.
A total of RM890 million out of the RM12.32 billion gross investment income was generated for Simpanan Shariah, and RM11.43 billion 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.
On the outlook for the remaining quarters of the year, Mohamad Nasir cautioned that 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,” he added.