PETALING JAYA: The Employees Provident Fund’s (EPF) investment income for the second quarter (Q2) ended June 30, 2017 has increased 36.36% to RM11.51 billion from RM8.44 billion a year ago.
Its CEO Datuk Shahril Ridza Ridzuan said in a statement on Friday that the market conditions have improved from a year ago and all asset classes in its portfolio recorded healthy year-on-year growth, with equities continuing as the main profit driver during the quarter.
The fund said it recorded lower net impairment of RM1.34 billion during the quarter, an improvement of RM2.28 billion or 62.98% from RM3.63 billion previously, in line with the better performance of the equities market.
From the RM11.51 billion investment income recorded, fixed income instruments contributed 37.29%, equities contributed 53.72%, while real estate and infrastructure and money market instruments contributed 6.23% and 2.64% respectively.
“While we recorded significant improvements in year-on-year performance in both the preceding and current quarters, there is a slowdown in momentum which saw corporate profits normalising in Q2 2017. We, therefore, expect a moderation in income growth for upcoming quarters,” Shahril added.
Equities, which made up 41.96% of EPF’s total investment assets as at Q2 2017, contributed RM6.18 billion of income, 61.45% higher than RM3.83 billion recorded in the previous corresponding quarter.
The fund said it also benefited from diversification into other asset classes that provide stable streams of income, including fixed income instruments and real estate and infrastructure investments through its subsidiaries.
EPF said a total of RM820.71 million out of the total investment income of RM11.51 billion was generated for Simpanan Shariah, while RM10.69 billion was generated for Simpanan Konvensional.
In equities, Shahril said the banking sector has been outperforming since the beginning of the year, noting the bulk of its impairments during the quarter came from the telecommunications and oil and gas sectors.
“If this continues, we expect that Simpanan Konvensional will benefit from the former and outperform in the short term,” he said.
As at Dec 31, 2016, the value of EPF’s investment assets reached RM759.78 billion, a 3.92% or RM28.67 billion increase from RM731.11 billion previously.
Out of the total investment assets, RM362.50 billion or 47.71% was in syariah-compliant investments and the balance in non-syariah assets.
As at June 30, 2017, the fund’s overseas investments, which accounted for 29% of its total investment asset, contributed 32.5% to the total investment income during the period.
Commenting on the outlook for the second half of the year, Shahril said with the ringgit showing signs of improved stability, global investments would remain one of EPF’s significant revenue drivers.
“Domestically, while gross domestic product growth continues to improve, the EPF will be vigilant of other external factors which may create uncertainty, including the possibility of global rate hikes, and rising geopolitical tensions.”