Malaysia’s Employees Provident Fund (EPF) reported a near 20% slump in first-quarter investment income and warned that inflation, rate hikes and supply chain constraints worsened by the war in Ukraine will continue to drag on global markets.
The pension fund, Malaysia’s largest, saw its gross investment income shrink 17.83% to 15.85 billion ringgit (US$3.6 billion) in the three months to March from 19.29 billion ringgit in the first quarter of 2021.
Chief Executive Officer Amir Hamzah Azizan says the fund had a strong start early in the year but this reversed when global markets were slammed as inflation soared, central banks hiked rates, and Russia invaded Ukraine.
“Inflationary concerns, supply chain disruptions and tightening of monetary policy by major central banks are likely to continue to dampen both the equity and bond markets,” he says in a statement on June 21 when releasing the financial results.
He says the EPF managed to “leverage on its portfolio position to capitalise on additional gains” in the first quarter. Equities contributed 10.46 billion ringgit to gross investment income, or two-thirds of the total.
According to the EPF, 52% of total gross investment income came from the 37% of its assets invested overseas. The fund’s total assets under management edged up to 1.02 trillion ringgit from 1.01 trillion ringgit at the end of 2021.
Amir Hamzah says the EPF will be cautious in navigating downside risks and will “continue to rebalance the fund’s positions in stocks that are fundamentally strong but undervalued”.
He says the EPF is optimistic about Malaysia's growth prospects now that Covid-19 restrictions have been lifted, with both domestic and external demand expected to grow, in line with the government’s forecast for the economy to expand 5.3%-6.3% this year.