Thursday, December 4, 2008

EPF is affected by the Stock Market too

This article in The Star shows that performance of EPF's investment is affected by the ups and downs of the stock market too. Thus the return that EPF can provide for its members can be affected by the performance of the stock market. This is because the EPF invests quite substantially in the stock market.

Risks due to investment in the stock market is substantially reduced if the amount that is allowed to be withdrawn from the EPF is invested in a well managed unit trust fund. It has been shown in the past that the performance of a good unit trust fund has always exceeded that of the EPF over the long term.

Thursday December 4, 2008
EPF Q3 income dips 60%

PETALING JAYA: The Employees Provident Fund’s (EPF) total investment income for the third quarter (Q3) fell 60.4% to RM2.06bil from RM5.2bil in the previous quarter (Q2) as its investments, especially equities, were affected by the global economic uncertainty.

The EPF said in a statement yesterday income from equities in the June to September period fell by more than half to RM1.26bil from RM2.54bil in the preceding quarter.

In line with accounting best practices and as a conservative provisioning policy, the EPF also made allowances amounting to RM2.29bil for diminution in the value of equity investments due to the deterioration in market value compared with RM416.7mil in Q2.

“The outlook in the fourth quarter is likely to reflect the full-scale impact of the global meltdown, although there is still hope for the Malaysian equity market to bounce back,” chief executive officer Datuk Azlan Zainol said yesterday.

Azlan believed Malaysia’s competitive edge would help sustain the economy during these difficult times.

The EPF said due to the current global economic uncertainty, stock markets across the globe had fallen significantly, including the local equity market.

Bursa Malaysia’s market capitalisation during Q3 shrank by about RM200bil to RM770bil.

In the same period, the KL Composite Index fell 243.81 points, or 19.3%, to 1,018.68.

On the investment income of RM2.06bil in Q3, the EPF said it was predominantly driven by Malaysian government securities (MGS) and loans and bonds.

In the quarter under review, the EPF received 3.1% higher returns from loans and bonds, raising income to RM1.71bil which was an increase of 3.14% or RM52.05mil from Q2’s RM1.66bil.

Its investment income in MGS rose 1.38% to RM1.217bil against the preceding quarter’s RM1.2bil.

EPF said the most of Q3 investments were in the trade and services sector and the finance sector comprising 38% and 33.9% of total equity investments respectively.

The next largest Q3 equity investment was in the plantations sector, representing 8.5% of total equity investments.

Money market instruments provided an income of RM142.25mil, down 49.21% from RM191.46mil in Q2.

Investments in properties yielded returns of RM21.53mil, down from RM22.66mil in Q2.

“The EPF will always maintain a policy of low-risk investment decisions. As a national premier pension fund, we cannot afford to take on high risk investments,” Azlan said.

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