Bigger write back for EPF likely

By LEONG HUNG YEE

PETALING JAYA: The Employees Provident Fund (EPF), which made a RM4.69bil provision for the diminution in value of its equities investment last year, could write back a bigger amount this year as equity markets continue to improve.

The pension fund Thursday announced that it recorded a RM4.8bil investment income for the second quarter ended June 30, reflecting a 46.64% increase from RM3.27bil achieved in the first quarter.

For the first six months, the EPF had an investment income of RM8.07bil.

Chief executive officer Tan Sri Azlan Zainol said although there were signs of stabilisation in the local markets, it was too early to see how it would affect EPF for the rest of the year.

“While we cannot say that the worst is over, should this trend continue or at least maintain at current levels, we are positive that we can reverse the bulk of the allowances for diminution in value of equity investments that we made last year,’’ he had said.

In an earlier interview with StarBiz, Azlan said EPF expected to recover the bulk of its investments when the Dow Jones reached 9,000 points.

The fund has invested in major overseas markets and local banking stocks rank high in its portfolio.

The Dow Jones Industrial Average closed at 9,344.61 points overnight.

Inter-Pacific Research head Anthony Dass believed that if the market continued to recover, EPF could probably write back part or all of its provision.

However, he said the current third quarter would be “very tricky” for the pension fund to write back its provision as trading on the local bourse had slowed down.

“We are not seeing that kind of huge trading volume nowadays. However, EPF is investing in fundamentally good stocks and these are the stocks that hold up the FTSE Bursa Malaysia KL Composite Index,” Anthony said.

He added that the potential of recovering last year’s RM4.69bil provision was there, given the EPF’s strong portfolio.

The EPF is heavily invested in index-linked stocks such as Sime Darby Bhd, RHB Capital Bhd, Tenaga Nasional Bhd, Public Bank Bhd, Malayan Banking Bhd and Bumiputra-Commerce Holdings Bhd.

The EPF had earlier warned that this year’s dividend payout might be less than the 4.5% in 2008.

On the dividend for this year, Anthony said it would somewhat be “in line with” or even “slightly better” than last year.

A head of research with a local bank-backed research house expects this year’s dividend to be around 4.7%. “Based on the figures in the first half, it (dividend) could be around 4.7% or less,” he said, adding that 4.7% “was not too bad”.

He said the RM4.69bil provision was not really an issue but the mark-to-market could be more material.

He added that the provisions would only be realised when EPF sold its equity investment and the provision would be written back once the equity markets recovered.

Meanwhile, another head of research at a local brokerage said EPF should be able to write back part of its provisions this year, given that the local market had risen more than 30% over last year.

On dividend from EPF, he said it had not been very spectacular but he expected it to be between 4.5% and 5% this year.