PETALING JAYA: The Employees Provident Fund (EPF) posted a 74% jump in investment income to RM11.8bil in the first quarter ended March 31, as it benefited from rising global stock prices.

The value of its assets under management rose 2.2% or RM16bil from Dec 31, 2016 to RM747.2bil.

“The positive market condition was conducive for profit taking activities leading to higher gross investment income in the first quarter and also lower net impairment,” said chief executive officer Datuk Shahril Ridza Ridzuan.

The FTSE Bursa Malaysia KL Composite Index rose 6%, driven by growth in the banking sector and the return of foreign funds into the local bourse.

Meanwhile, global stock indices improved by as much as 12% during the quarter under review.

“While we had an encouraging first quarter, we remain cautious moving forward as the recovery in commodity prices remains weak with continued currency volatility,” Shahril said in a statement yesterday.

Investment income from its equity portfolio reached RM7.1bil during the first quarter, according to the EPF, up from RM2.5bil in the same corresponding period last year.

The sharp increase was boosted by the recovery in banking stocks, which contributed to about 30% of the trading and dividend income for the equities portfolio during the quarter.

“In addition to improvement in the domestic equity market, the global market also continued to provide opportunities for the EPF to realise its gains despite volatilities arising from the elections in eurozone countries, US president Donald Trump’s healthcare bill, the US interest rate hike and negotiations surrounding Brexit,” Shahril said.

“The market moving factors were alleviated by the positive economic numbers, including the revised growth forecast for major economies,” he added.

The EPF recorded lower net impairments from RM1.6bil to RM775.9mil this year, a decrease of RM865mil, following the improvement in all major markets.
Overseas investment accounted for 29% of its total investment asset and contributed 37% to the total investment income recorded in the first quarter of 2017.
Of the total investment asset, RM352.7bil, or 47.2% was in syariah-compliant investments with the balance invested in non-syariah assets. As of March, 49.1% of EPF’s investment assets were in fixed income instruments. This portfolio recorded an income of RM4.1bil, or slightly more than a third of the fund’s quarterly investment income.

Following the commencement of Simpanan Syariah on Jan 1, a total of RM952.1mil out of the total gross investment income of RM11.8bil was generated for Simpanan

Syariah while RM10.8bil for Simpanan Konvensional.

Simpanan Syariah derives its income solely from its portion of the syariah assets while the income for Simpanan Konvensional is generated by its share of syariah and also non-syariah assets.

Shahril said the performance of Simpanan Syariah and Simpanan Konvensional would depend on the market’s performance, thus making short-term differences between the two inevitable.

“In the long run, the performance of the two should be similar following similar strategies implemented for both accounts,” he said.

The EPF, he said, remains focused on delivering real dividend target of at least 2% above inflation over a three-year rolling period for both Simpanan Syariah and Simpanan Konvensional.