The retirement fund reported a gross investment income of RM15b in 2Q20, up 24% compared to RM12b for 1Q20

by DASHVEENJIT KAUR / pic by TMR FILE

SINCE the start of the Movement Control Order (MCO) in mid-March, the Employees Provident Fund (EPF) has been the most active local institution amid market volatility.

The total equity value of EPF’s stocks increased by RM26.99 billion since the end of the first quarter (1Q) this year to RM155.51 billion.

EPF decreased its shareholdings in only 62 stocks, while its stake in 111 stocks increased within the same period.

The retirement fund recently reported a gross investment income of RM15.12 billion for 2Q ended June 30, 2020 (2Q20), up 24.3% compared to RM12.16 billion reported for 1Q20, as equities trended upwards towards the end of 2Q20.

Its net investment income came in at RM13.46 billion for the quarter, up 79.5% from RM7.5 billion for 1Q20.

At end-June its investment assets stood at RM929.64 billion, of which 30% were invested overseas.

Equities contributed 54% or RM8.11 billion of the retirement fund’s gross investment income for 2Q20, while fixed income instruments contributed RM6.17 billion, real estate and infrastructure contributed RM470 million, and money market instruments provided the remaining RM370 million.

According to MIDF Amanah Investment Bank Bhd Research, year-to-date (YtD) local institutions were net buyers at RM10.88 billion and retailers at RM9.61 billion.

This is amid foreign net selling amounting to RM20.87 billion worth of equities on Bursa so far in 2020.

Other local institutions that were active were Kumpulan Wang Amanah Pencen and Permodalan Nasional Bhd-owned funds, via Yayasan Pelaburan Bumiputra and Amanah Saham Bumiputera.

YtD, the main index, FTSE Bursa Malaysia KLCI, which tracks the 30 largest stocks, is down 5.1%, while its one-year return is at -7.11%.

In total, the EPF has gross equity assets of RM155 billion under management invested in 300 securities at present.

By industry sector, its largest current exposures are in the financials (31.2%) and consumer staples (16.4%) sectors.

By geographic region, its largest current exposures are in Asia Pacific (Emerging) (96.8%) and Western Europe (3%).

By market cap, its largest current exposures are in mid cap (50.9%) with a market value of RM79.21 billion and large cap (32.5%) stocks worth RM50.6 billion in market cap.

On a quarter-to-quarter basis, the EPF’s market value in large cap stocks recorded a significant increase of RM6.22 billion, while mid cap stocks increased by RM4.02 million as the market rose driven by liquidity and trading volumes.

Most recently, the retirement fund increased its stake in Malaysia Building Society Bhd (MBSB) via its move to accept shares for dividends announced by the Islamic bank. EPF now controls 65.4% of MBSB.

Bursa filings by the companies show the fund now owns 4.6 billion shares in the MBSB with a value of RM2.46 billion after adding 231.9 million shares in August this year.

The provident fund also invested into Leong Hup International Bhd in April this year, purchasing some 116.4 million shares or 3.19% stake. The current market value of its holdings stands at RM85.94 million.

Interestingly, after EPF ceased to be a major shareholder in glovemaker Hartalega Holdings Bhd on Jan 23 this year, Bloomberg data revealed EPF repurchased some 70.97 million shares on June 22, giving it a 2.07% holding in the company.

EPF also ceased to be a substantial shareholder in Top Glove Corp Bhd by April 8, after selling some 7.9 million shares worth some RM50.8 million then.

The fourth-largest increase in EPF’s shareholdings was in semiconductor firm Elsoft Research Bhd after it purchased over 52 million shares, giving it a 9% stake in the company.

The fund has purchased additional 48.71 million and 41.42 million shares in MMC Corp Bhd and FGV Holdings Bhd respectively in the period.

In terms of largest stake reduction, EPF’s most significant decrease was in AirAsia Group Bhd, with the most recent round of disposal being 90.17 million shares on June 30, bringing down its interest to 2%.

The selling had been sustained since February this year, when the fund made several transactions.

EPF has also been trimming its stake in Boustead Plantation Bhd, a company it was once a major shareholder in.

The most recent round of disposal involved 57.22 million shares, leaving it with only 49.43 million shares in the company or 2.21% stake.

EPF has been actively divesting and has ceased to be a substantial shareholder in other companies as well.

The fund has also ceased to be a substantial shareholder of Pos Malaysia Bhd, selling a further 30.14 million shares, to reduce its stake to 0.56%.

The fund has been selling shares in Pos Malaysia shares quite regularly since March 31.

It is also no longer a substantial shareholder of WCT Holdings Bhd after selling 44.25 million shares in the construction and property development outfit on May 29, leaving it with only 1.65% stake in the company.

The EPF has ceased to be a substantial shareholder of Scicom (MSC) Bhd after divesting 980,700 shares or a 0.27% stake in the technology and business process outsourcing company on April 14.

It is worth noting the fund had already offloaded 3.67 million shares or a 1.03% stake between April 8 and April 10. To date, it still owns 17.74 million shares or a 4.99% stake in the company according to Bloomberg data.

EPF is no longer a major owner of Star Media Group Bhd after disposing of 12 million shares or a 1.6% stake on April 9.

A day earlier, the fund had divested 11.1 million shares or a 1.5% stake in the media company.

Following the disposal of the stakes, EPF owns 29.78 million shares or about 4% of Star Media.