Professor of Economics at Sunway University’s Business School, Yeah Kim Leng said it was challenging for the EPF to repeat 2015’s sterling performance given the decline in domestic equity prices, low local bond yields and more moderate growth of the overall economy.
“This is proven by the recent announcement by Bank Negara Malaysia on Malaysia’s economy in 2016, with gross domestic product growth of 4.2% from 5% recorded in the previous year,” he added.
To recap, in 2015, the pension fund declared a dividend of 6.4% with a total payout of RM38.24 billion. The total payout this time around amounts to RM37.08 billion.
Yeah said as the EPF had a high exposure to the oil and gas sector on Bursa Malaysia, the lower crude oil prices did not have a positive impact on it.
He added that given the stable performance of EPF’s fixed income portfolio, the lower domestic equity returns was offset by the likely better performance of its foreign equity holdings.
In addition, with the ringgit’s depreciation, the foreign translation gains also provided an additional boost to EPF’s income.
“Based on the expected returns to the various asset classes, analysts did forecast this slightly lower rate of below 6%.
“However, it will still give consumer sentiment a small lift,” Yeah said.
In a statement earlier, EPF chairman Samsudin Osman said the fund is pleased it has been able to consistently exceed its two strategic investment targets of at least 2.5% nominal dividend on a yearly basis and at least 2.0% real dividend on a rolling three-year basis.
“As a retirement savings fund, EPF always emphasises on sustainability of returns over the long term horizon as opposed to short term gains.
“This is a commendable achievement in view of the much tougher market environment. For 2016, the rolling three-year real dividend was 3.83%, 183 basis points above the target,” he added.
Besides the EPF, almost every pension and investment fund worldwide suffered from the adverse effects of the steep fall in crude oil prices to historical lows of US$28 per barrel last January, the marked depreciation of the ringgit and Brexit referendum woes.