Wednesday March 14, 2012

EPF continues to sell equities


The pension fund taking profit after the benchmark index nears record high

PETALING JAYA: The Employees Provident Fund (EPF) sold a further RM288.05mil worth of shares on March 8, after selling RM441.09mil worth a day earlier.

According to filings with Bursa Malaysia, the fund managers engaged by the EPF disposed of a total 49.88 million shares, while also acquiring 10.58 million shares.

Among the EPF's biggest disposals on March 3 were 8.08 million shares in Petronas Chemicals Bhd, seven million shares in YTL Corp Bhd and four million shares in CIMB Bank Bhd.

A source close to the EPF explained that the pension fund took profit to lock up gains after the benchmark FBM KLCI neared an all-time high of 1,594.74 points.

He said about 48% of EPF's gross investment income was contributed by equities last year, and 35.6% of its total investment portfolio comprised equities, valued at about RM167bil, as at December 2011.

The balance of its investment portfolio consisted of 26.5% in government securities and 34.2% in bonds, both fixed income assets that tend to offer lower dividends in line with the current low interest rate regime.

Note: This chart is file graphics from yesterday

“In order to give a higher payout in terms of dividends, EPF has to make money from equities trading,” he said. “When EPF makes money, the normal working adults and contributors are also making money indirectly.”

Meanwhile, an analyst at local research house said the market was poised for more upside, as there had been no pre-election rally yet.

“Furthermore, the FBM KLCI has broadly underperformed as it has only recorded a 2.18% gain year-to-date, whereas other regional markets are experiencing strong double-digit growth,” the analyst said.

Japan's Nikkei 225 recorded a year-to-date gain of 17%, Hong Kong's Hang Seng has climbed 15.7% while Korea's Kospi Index has gained 10.9%.

He said news of the EPF selling down equities might turn the market cautious.

“Although the market has recorded net foreign inflows, selling by domestic funds might spook the market and put more downside on the market,” he said.

On the bright side, he said fundamentals of the market were still intact, with more newsflow from sectors like banking, construction, and oil and gas to be the next catalyst to drive up the market.

“I see no point in EPF sellling down right now as earnings had started to stabilise and first-quarter results should be within expectations or may outperform consensus.

“This is just a portfolio re-balancing by the EPF fund managers, as it is not a outright sell. They are still acquiring despite selling more than buying,” he said.

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