EPF’s total investment income rises to 12.82pc to RM14.61b in Q3

KUALA LUMPUR, Dec 19 ― The Employees Provident Fund’s (EPF) total investment income for the third quarter ended September 30, 2018 (Q3) rose 12.82 per cent to RM14.61 billion from RM12.95 billion recorded during the same period last year. Deputy…

EPF posts 12.82% rise in Q3 investment income to RM14.61b

PETALING JAYA: The Employees Provident Fund (EPF) reported a 12.82% growth in investment income to RM14.61 billion for the third quarter ended September 30, 2018 compared with the RM12.95 billion it made in the same period last year.

“Q3 2018 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 Q3 2018 from the market downturn experienced in previous quarters, while developed market equities continued to record positive growth from previous quarter,” said EPF deputy CEO (Investment) Mohamad Nasir Ab Latif in a statement.

“Volatility is increasingly felt across the region, in which we saw a decline in regional equity markets in the fourth quarter of 2018. This will certainly pose a huge challenge to the EPF to sustain the same income momentum for the fourth quarter,” he added.

Mohamad Nasir said the EPF remains cautious of he 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% real dividend on a rolling three-year basis.”

A total of RM1.33 billion out of the RM14.61 billion gross investment income, was generated for Simpanan Shariah and RM13.28 billion for Simpanan Konvensional.

The EPF said equities, which made up 40.67% of the pension fund’s total investment assets, continued to be the main revenue driver, contributing RM8.89 billion, which is equivalent to 60.81% of total investment income.

A total of 50.72% of EPF’s investment assets were in fixed income instruments, which continue to provide consistent and stable income, reduce overall risk and protect against volatility of the EPF’s portfolio.

Fixed income investments recorded an income of RM4.73 billion, equivalent to 32.40% of the quarterly investment income.

Income from Malaysian government securities (MGS) & equivalent increased to RM2.5 billion, while loans and bonds generated an investment income of RM2.24 billion.

Real estate & infrastructure’s investment income jumped to M726.23 million on the back of higher dividend income.

Investments in money market instruments, which represent 3.92% of the total investment assets, contributed RM265.39 million to the investment income.

In accordance with the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9), which came into effect beginning 1 January 2018, the EPF noted that capital gains on disposal of equity amounting to RM5.17 billion for the Q3 2018 will flow directly to retained earnings from the statement of other comprehensive income, instead of the statement of profit and loss as under the previous MFRS 139.

Under MFRS 9, the EPF would also no longer recognise any impairment on its equity holdings.

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Slim chance of window dressing on Bursa next week

PETALING JAYA: The FBM KLCI is expected to end the year at circa 1,630 points with a slim chance of any window dressing, said Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew.

He does not expect local funds to do any window dressing, which would require a lot of money and may not be successful.

“If there is any window dressing at all, it would only happen in the last few days of the year, maybe one or two days before the year ends. It will be very last minute,” he told SunBiz.

Earlier in May, Pong said that the KLCI could end the year at 1,630 points if stock market earnings performance hold to a growth of about 6%.

“Today we are already at that level. If the earnings growth is worse, it will fall below 1,630 points. Looking at the way things are going, I believe it is likely to go below 1,630 points,” he added.

He said earnings growth are likely to fall below 6% based on third quarter data and growth since then, combined with the likelihood of a sharp drop in the next few days. Based on signals from the market, he expects earnings growth to come in around 4%.

Today, the FBM KLCI opened 13.15 points weaker at 1,628.47 and ended 6.31 points lower at 1,635.31 from yesterday’s close of 1,641.62.

For 2019, Pong said economic performance could be worse than 2018, depending on the government’s spending.

“If the government doesn’t spend because of poor oil prices or poor revenue from taxes or other reasons, things could spiral downwards and negatively affect corporate earnings. The government frequently takes the lead in spending and initiatives for infrastructure. If the government doesn’t spend for development expenditures, the momentum would not be there,” he said.

He said economic growth has to be at least 4% in order to be “healthy”, as a 3-4% growth would mean that there are parts of the economy that are stagnant or contracting.

Meanwhile, Areca Capital Sdn Bhd CEO Danny Wong declined to comment on window dressing activities at end-2018, saying that the short-term outlook is very sentiment-driven.

“Earnings for 2019 may not be as robust as 2018, especially in the second half of 2019,” he said.

However, he noted that Asia is still an engine of growth and maintained his positive outlook on economic growth and corporate earnings for next year.

“Earlier, I expected the third and fourth quarters this year to be better than the first and second quarters but it turned out to be worse. I still maintain my outlook but perhaps it has been delayed till 2019,” he said.

On foreign funds, which saw a large outflow so far this year, Wong expects foreign funds to return next year, for both equities and bonds, driven by 4-5% gross domestic product growth, the attractiveness of the ringgit and low valuations.

“Investors will watch out for countries with twin deficit but fortunately, Malaysia has a current account surplus, which will continue as the government has put on hold mega projects,” he said.

He said the rating agencies are still on hold on Malaysia due to the strong economy, with potential for a rating upgrade next year.

CIMB to gain RM200m from stockbroking business transfer

PETALING JAYA: CIMB Group Holdings Bhd is expected to record a gain of disposal of approximately RM200 million from the process of transferring the group’s stockbroking business to its joint venture company with China Galaxy Securities Co Ltd.

This comes after taking into account the premium on the disposal of approximately RM433 million and goodwill attributable to the business.

CIMB said the consideration in connection with the proposed business transfer will be satisfied in cash and it was determined based on the future prospects and net asset value of the in-scope business as at Dec 31, 2015, which amounted to RM565.6 million.

The consideration is subject to closing audit adjustments, if any.

Jupiter Securities, the subsidiary of China Galaxy Securities Co Ltd (CGS)-CIMB Holdings Sdn Bhd, which is the Malaysian joint venture entity, will operate the stockbroking business.

CIMB said in a stock exchange filing that its wholly owned subsidiary CIMB Group Sdn Bhd (CIMBG), China Galaxy’s wholly owned unit China Galaxy International Financial Holdings Ltd (CGI), and CGS-CIMB Holdings Sdn Bhd has inked a share subscription agreement for the subscription of new shares in CGS-CIMB Holdings Sdn Bhd.

The proposed business transfer entails the sale of CIMB Investment Bank Bhd’s cash equities business and 100% equity interest in CIMB Futures Sdn Bhd as well as CIMB Bank Bhd’s equity financing services business and share margin financing granted in connection with the cash equities to Jupiter Securities.

After the completion of the exercise, CIMBG and CGI will hold 50% stake each in the Malaysian JV entity.

The exercises are expected to be completed in the first half of 2019.

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