EPF: 2018 bull run of local exchange, ringgit may ease

The euphoria has been going on for quite some time now, but good things have come to an end too, says EPF CEO


The Employees Provident Fund (EPF) is approaching the new year with caution as it expects the bull run of the local stock market and the ringgit to wane in 2018.

The FTSE Bursa Malaysia KLCI Index rallied as much as 7.5% from 1,635 points in January to close at 1,759 points yesterday — pointing to heightened optimism as year-end window dressing activities boosted sentiment.

Meanwhile, the ringgit gained 9% over the same period from RM4.4938 to RM4.0845 yesterday, despite several rate hikes by the US Federal Reserve this year.

EPF CEO Datuk Shahril Ridza Ridzuan (picture), however, said the run may fall short in 2018 although he believes there is still room for the local exchange and ringgit to make headways.

“The euphoria has been going on for quite some time now, but good things have come to an end too.

“Therefore, we are cautious in our outlook for 2018. Moving forward, we believe the valuation will be more rational as the excitement subsides,” Shahril Ridza told a media briefing in Kuala Lumpur yesterday.

Meanwhile, Shahril Ridza said the country’s largest pen- sion fund will not be investing in cryptocurrency as it had “no intrinsic value”.

“We find it hard to invest in anything that has no intrinsic value. We do not know what the actual yield of the investment will be. The return profile is important,” he said.

However, Shahril Ridza did not discount the possibility of expanding its overseas portfolio beyond the current 30% of its total investment assets.

The country’s largest pension fund has been steadily increasing its investments overseas since 2009, rising from 6% to 30% this year.

The EPF has initially set a medium-term 30% cap in terms of the proportion of assets that can be capitalised abroad. However, the cap is expected to be reviewed to include potential new investments in different countries across various sectors.

EPF deputy CEO of investment Datuk Mohamad Nasir Ab Latif said the fund’s overseas investments could grow by an additional 2% by end- 2019. Nevertheless, it will depend on the discussions with the Finance Ministry.

As at September 2017, EPF’s total investment value abroad stood at RM231 billion, or 48% of its total investment income.

Of the amount, 17% came from the US, while the rest was from 39 other countries.

Its present investments in the world’s largest economy are said to have delivered about 11.1% returns compared to 7% for local investments.

On its proposed US$3 billion (RM12.3 billion) to US$4 billion investment in the US, Shahril Ridza said the EPF will likely venture into investments in infrastructure assets.

“We already invested in the equities market, and now we are looking at infrastructure assets with good returns because as an institutional fund, we are always looking at long-term investment opportunities. In Malaysia, we have invested in Tenaga Nasional Bhd and highway operator PLUS Malaysia Bhd,” he said.

The EPF earlier announced four enhancements to its schemes and policies, which will take effect on Jan 1, 2018.

The initiatives include the option to appoint Amanah Raya Bhd as a trustee, flexible post-retirement withdrawals and an extension of death benefit from age 55 to 60.

The pension fund’s policy revision will see account holders, aged 55 and 60, be allowed to make partial withdrawals of any amount at any time, as opposed to the current policy that only permits withdrawals of a minimum of RM2,000 once every 30 days. The age cap for withdrawal has also been extended to 100 years old.

Additionally, the death bene-fit age will be revised to be in line with the national retirement age of 60 years old.