Deputy CEO (investment) Mohamad Nasir Ab Latif said the improvement was driven by recovery in Malaysia and Asean equities from the market downturn in previous quarters. Developed market equities also continued to record positive growth from the previous quarter.
“The third quarter saw us navigating volatile market conditions, fuelled by the trade tensions between China and the US.
“Volatility was 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 said in a statement today.
In Q3, he said equities made up 40.67% of the EPF’s total investment assets, contributing RM8.89 billion and representing 60.81% of total investment income for the period.
“A total of 50.72% of the 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 fund’s portfolio, in line with the EPF being a balanced fund,” he said.
He said fixed income investments recorded RM4.73 billion in Q3, equivalent to 32.40% of the quarterly investment income.
Other contributors to the investment income were Malaysian government securities (MGS) and equivalent (RM2.50 billion), loans and bonds (RM2.24 billion), money market instruments (RM265.39 million) and real estate and infrastructure (RM726.23 million).
He said a total of RM1.33 billion out of the RM14.61 billion gross investment income was generated for shariah saving and RM13.28 billion for conventional saving.
“Shariah saving derives its income solely from its portion of the shariah portfolio while income for conventional saving is generated by its share of both shariah and conventional portfolios,” he said.
Nasir said in accordance with the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9), which came into effect on Jan 1 this year, capital gains on disposal of equity amounting to RM5.17 billion for Q3 would flow directly to retained earnings from the statement of other comprehensive income.
This was opposed to the statement of profit or loss under the previous financial reporting standard, he said.
“In addition, under MFRS 9, the EPF will no longer recognise any impairment on its equity holdings,” he said.
On outlook, he said the EPF remained cautious of the 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 finance ministry and Bank Negara Malaysia towards the EPF’s long-term global diversification efforts, which will greatly assist the fund towards delivering its strategic targets of at least 2.5% nominal dividend and 2.0% real dividend on a rolling three-year basis,” he added.