KUALA LUMPUR, Malaysia � The Employees Provident Fund (EPF) has reported a 9.20 per cent increase in total investment income to RM12.88 billion for the first quarter ended March 31, 2018 (Q1 2018) from RM11.79 billion in the same period last year.
In a statement today, the provident fund said the consistent performance was driven by domestic and ASEAN markets, which recorded positive growth despite developed markets experiencing a decline in the first quarter, following higher-than-anticipated inflation in the United States.
Coupled with diversification into various markets, geographies and sectors, we have been able to cushion the decline in developed market equities, and this has resulted in consistent performance to our overall portfolio with domestic equities emerging as an outperformer, said Chief Executive Officer Shahril Ridza Ridzuan.
He said in Q1 2018, equities, which made up 41.59 per cent of the EPF’s total investment assets, contributed RM7.93 billion, representing 61.58 per cent of total investment income for the quarter.
A total of 50.53 per cent of the EPF’s investment assets were in fixed income instruments, which continue to provide consistent and stable income.
The first quarter saw fixed income investments recording an income of RM4.76 billion, equivalent to 36.99 per cent of the quarterly investment income, while income from Malaysian Government Securities (MGS) & Equivalent increased to RM2.24 billion.
Loans and Bonds generated an investment income of RM2.52 billion while investments in money market instruments, which represented 2.91 per cent of the total investment assets, contributed RM292.91 million to the investment income.
During the quarter under review, Real Estate & Infrastructure recorded negative investment income at RM107.38 million, primarily caused by the weakening of the US dollar against other major currencies, including the Malaysian ringgit, which impacted valuations on the investment.
However, the negative investment income recorded for the asset class is expected to be offset by the inflow of investment income in the coming quarters.
The value of the EPF’s investment assets reached RM814.38 billion, a 0.53 per cent or RM4.25 billion increase, from December 31, 2017.
Out of the total investment assets, RM321.05 billion, or 39.42 per cent, was in Shariah-compliant investments while the balance was invested in the conventional portfolio.
A total of RM1.22 billion out of the RM12.88 billion total gross investment income was generated for Simpanan Shariah with RM11.65 billion for Simpanan Konvensional. Simpanan Shariah derives its income solely from its portion of the Shariah assets while income for Simpanan Konvensional is generated by its share of both Shariah and conventional assets.
In accordance with the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9), which came into effect on January 1, 2018, there will be some changes in the EPF’s financial reporting.
The EPF has always adopted the most current relevant standards.
Accordingly, capital gains on disposal of equity amounting to RM6.19 billion will now flow directly to retained earnings from the Statement of Other Comprehensive Income as opposed to the Statement of Profit or Loss under the previous MFRS 139, said Shahril.
Nonetheless, the fund expects the impact of MFRS 9 on its financials to be minimal.
In addition, under MFRS 9, the EPF would no longer recognise any impairment on its equity holdings.
As at end-March 2018, the EPF’s overseas investments, which accounted for 27.30 per cent of its total investment asset, contributed 33.60 per cent to the total investment income during the quarter under review.
Commenting on the outlook, Shahril said the performance of the global market in the current quarter and for the rest of the year remains uncertain and the fund would continue to exercise caution amidst the aggressive pace of rate hikes by the US Federal Reserve.
Increased global trade tensions and weaknesses in key emerging countries present real threats to all markets and we are cautious of the overall outlook for returns this year.
On the domestic front, we maintain a long-term positive outlook as Malaysian fundamentals remain strong despite some short-term volatility after the recent elections, he added.
Source: NAM News Network