Retirement investing & EPF

 Section 12: Discussions on retirement investing & EPF.

Elaboration of Section 12

This section presents a practical, real-world discussion among the group members, centered on a crucial question for Malaysian retirees: What should I do with my EPF (Employees Provident Fund) savings upon reaching the withdrawal age? The conversation moves from a simple question to a nuanced analysis, applying the principles discussed in earlier sections.

1. The Core Dilemma: To Withdraw or Not to Withdraw?
The discussion is triggered by a member asking whether it's wise to leave his EPF savings in the fund to continue earning its historically higher dividends (5-6%) compared to the "paltry interest" from Fixed Deposits (FDs).

2. The Key Factors in the Decision
The responses highlight that there is no one-size-fits-all answer. The decision must be based on a personal assessment, echoing the themes of Section 2 (Knowing Yourself):

• Financial Situation & Objectives: The first response correctly states that the answer depends entirely on the individual's financial picture, including other assets, debts, and income needs.

• Risk and Return Analysis:

  • EPF's Allure: EPF is presented as a virtually risk-free investment that has consistently delivered returns (~5-6%) significantly higher than FDs (~3.5%). The power of compounding this small percentage difference over many years is substantial.

  • The Justification for Withdrawal: The key insight is that if you withdraw from EPF to invest in riskier assets like stocks, you should have a compelling reason. Specifically, you should aim for a potential return that is at least twice what EPF offers (e.g., 10-12%+) to justify taking on the additional risk. If you cannot confidently achieve this, leaving the money in EPF is the wiser choice.

• Alternative Uses for the Money: Withdrawing makes sense if the capital can be used for other high-impact financial goals, such as:

  • Paying down high-interest debt (e.g., credit cards).

  • Making a down payment on a property to avoid a large mortgage.

3. Advice for the Less Knowledgeable Investor
A clear and cautious path is outlined for those who admit they are not financially astute:

• Default Option: For the risk-averse or financially inexperienced, the safest and most recommended option is to leave the money in EPF. It offers a superior return to FDs with a similar level of safety.

• The Buffett Endorsement: One member reinforces this by pointing out that even Warren Buffett advises his wife's inheritance to be put into a low-cost index fund. This is because most active fund managers fail to beat the market, and for a non-expert, trying to pick stocks is likely to result in losses.

• The Importance of Diversification: The warning is given against putting "all your eggs in one basket," even if that basket is cash. A balanced asset allocation is still necessary.

4. "OPM" Strategy
A member shares a behavioral and risk-management strategy:

• Concept: Use a small portion of capital (e.g., RM100,000) to invest. Once a profit (e.g., RM10,000-RM20,000) is made, return the original capital to a safe FD.

• Psychological Benefit: The investor then continues trading only with the "Other People's Money" (OPM)—the profits. This eliminates the stress of losing one's original capital, as any subsequent losses are only from the gains, not the principal.

5. The Power of Compounding and Starting Early
The discussion concludes with a powerful reminder of Section 5 and 28, emphasizing that the real secret to the success stories (like Uncle Chua) is regular investing and long-term compounding. This strategy is best started young, but the principles of patience and discipline are valuable at any age.

---

Summary of Section 12

Section 12 is a practical discussion analyzing whether to withdraw EPF savings at retirement, concluding that for most, leaving funds in EPF is the best default option unless they have the skill to generate significantly higher returns elsewhere.

• The Safe Bet: For the majority, especially those who are not investment experts, leaving savings in EPF is the most prudent choice. It offers an excellent balance of high safety and returns that outpace inflation and fixed deposits.

• The Bar for Withdrawal: You should only withdraw EPF funds to invest in the stock market if you are confident you can achieve returns at least twice that of EPF (e.g., >10-12% annually) to justify the extra risk.

• A Behavioral Strategy: The "OPM" (Other People's Money) method is suggested as a way to de-risk speculative investing by only risking profits, not original capital.

• The Ultimate Lesson: The conversation underscores that successful wealth-building is not about brilliant, one-time decisions but about the disciplined, long-term compounding of savings in a safe and productive vehicle, with EPF serving as a prime example for defensive investors.

In essence, this section applies the theoretical framework of intelligent investing to a critical real-life decision for Malaysian retirees, providing a clear, reasoned flowchart for action: When in doubt, trust the proven, low-risk compound growth of EPF.

Building a stock portfolio that beats EPF returns

May 2, 2020

There are many people who believe that stock investing can generate double-digit returns, which is higher than the 10-Year Dividend Yield Average of 6.17% per annum EPF return from 2010 to 2019.

So, is stock investing really better?

Firstly, in stock investing, the 10+% returns are not cash-based as delivered by the EPF and often, it refers to trading gains that are derived from buying stocks at low prices to selling them at higher prices later.

Thus, this 10+% returns are not guaranteed, predictable, or even recurring in nature.

Secondly, if you do not study a stock’s business model, financial results, and future plans before investing in it, and instead buy stocks because you anticipate they will rise in the future, then you are not investing but betting.

Lastly, it is one thing to make 10+% in returns in one year but a different feat if you can replicate this success and make 10+% in returns consistently every single year.

The keyword here is “consistency”.

So how does EPF invest your money to continue declaring future dividends? 

This article sheds light, along with pointers on how you can build a stock portfolio for consistently attaining higher returns than the EPF.

1: EPF’s Strategic Asset Allocation (SAA)

The EPF employs its SAA as a framework to optimise its long-term investment returns. The EPF allocates:

• 51% of its total investments into Fixed Income Instruments for capital preservation, 
• 36% into Equities to grow its returns, 
• 10% into Real Estate to hedge against inflation and 
• the remaining 3% is into Money-Market Instruments to fund its day-to-day operations.

In essence, it is likened to a person who has RM100,000 in capital to invest and parks 

• RM51,000 into FDs, 
• RM36,000 into stocks, 
• RM10,000 into REITs and 
• the final RM3,000 is left in his savings account for living expenses.

2: EPF invests primarily for income (cash flow)

The EPF has multiple recurring sources of income from its investment assets. They include 

• interest income from fixed income instruments, 
• dividend income from equities, and 
• rental income from real estate.

Combined, the amount of its recurring income has increased from RM16.2 billion in 2009 to RM32.6 billion in 2018.

They have contributed about 65% of EPF’s gross investment income for the past 10 years, which is key to its investment success and consistent delivery of the 6+% in annual dividends to its contributors.

EPF’s income flow from its investments.

3: EPF’s stock portfolio

The EPF built itself a global portfolio worth RM300 billion in 2018 where its key markets were in Malaysia, Hong Kong, USA and Singapore.

The following can be concluded by just focusing on the EPF’s top 30 equity holdings in Bursa Malaysia.

• Sector selection

The EPF places great emphasis on stocks that are cash cows. This is evident as it is the largest investor in Malaysia’s finance sector with 9/30 finance stock such as RHB, MBB, PBB and CIMB.

It also has a focus on the palm oil sector and telecommunication stocks, which are basically income and cash flow orientated.

• Holding period

The EPF has held onto 28 of these stocks for more than 10 years. It intends to earn dividend income from these stocks, which is a vital source of income for allowing EPF to pay recurring dividends to its contributors.

• Financial results

However, out of its 30 stocks invested, only 12 have generated a consistent increase in earnings for the long-term (five-10 years). The other 18 stocks have experienced a fall in earnings during the period. This leads to the next point:

• Stock price movements

The 12 that had consistent growth in earnings have enjoyed sustainable capital appreciation in the 10-year period, except for MBB for it has DRIP which requires a different way of assessing one’s total investment returns.

Stock prices of KL Kepong, Sime Darby Plantation and IOI Corporation had been flat.

The chart shows how the stocks have fared over the last 10 years.

How EPF’s stocks have fared over 10 years.

4: What works for EPF’s stock investments?

If you look at the 12 stocks that have appreciated in 10 years, the common ground is that these stocks have achieved consistent growth in profits.

Consistent growth in profits lead to a stock’s consistent growth in its stock prices. That is, in essence, value investing 101.

5: Should you keep your money in the EPF?

Based on financial reports, EPF has built a diversified portfolio of assets that are cash-flow orientated.

With continuous contributions from existing contributors and its dividends reinvested into the fund, EPF’s ability to continue making consistent dividends to contributors is intact.

Hence, if you don’t know how to invest, it would be better to just leave the money in EPF and enjoy the annual dividends.

What you can do is diversify a portion of savings into unit trust funds via i-Invest and collect not only 6+% in net dividend yields from the EPF, but also capital gains.

With that said, capital gains are not guaranteed, and you might incur capital losses instead if the funds fail to do well.

So, whether you can invest in the stock market and beat EPF’s returns depends on how good you are as a stock investor.

Most treat stocks like lottery tickets and invest in the hope that they will magically increase in price. It is, of course, flawed thinking.

This article first appeared in kclau.com

KC Lau

 -

May 2, 2020

https://www.freemalaysiatoday.com/category/leisure/2020/05/02/building-a-stock-portfolio-that-beats-epf-returns/?fbclid=IwAR1qcOySzpDiLdg_VpP6qzJxBoaIL-7M3vFtnD5e-fwUfQJUJD_xl6lfwNk

Amongst the millions of questions regarding financial matters, the most popular one is undoubtedly “How do I save my money?”. Here are 3 common ways that could help you save a sizable amount for when it’s time to retire.

1) Contribute to EPF, do NOT withdraw

For Malaysians, EPF is undoubtedly the easiest way to save your money. Your personal contribution of 11% aside, your employer’s mandatory contribution of 13% (for employees earning less than RM5,000 monthly salaries) makes it a total of 24% of your monthly wages saved under your name each and every month.

To top it off, EPF’s average return of 5% per year is significantly higher than any fixed deposit interests in the market right now.

Tips: Firstly, get employed at a company that contributes to EPF. Try to keep your money in your EPF account for as long as possible because there simply aren’t any other bank deposits with higher interest rates in the market. If you can help it, DO NOT use any of your EPF sub accounts to pay for your home or buy a computer, so you can take full advantage of EPF’s high interest rate to maximize your returns.

2) Put your money aside the good old fashion way

Saving your money requires determination and discipline. If you aren’t already doing so, try putting aside a small percentage of your salary every month-end and save it in a separate bank account, preferably one without any easy withdrawal facilities (eg. ATM).

When you have a moderate amount, transfer the money to a high-interest fixed deposit account so it can generate greater interests whilst stopping you from accessing the funds every time you feel like getting a new handphone or a new pair of shoes.

To find the best fixed deposits in the market right now, check out our fixed deposit comparison table.

Tips: Like many other things in life, saving is an endeavour that many find hard to adopt especially in the beginning. To ease yourself into your money-saving journey, you may wish to start off with a moderate amount (say 5-10% of your wages) so that it does not affect your cash flow to the extend of making you give up altogether. Over time, you can try to increase the amount as the act of saving becomes a habit. Also, when it comes to saving, it helps to start as young as possible so you can reap the benefits of compound interest over the long run.

3) Use your money to invest in something

If you have moderate tolerance to risk, are not close to retirement age and have a sizable amount in your savings or fixed deposit account, you’ll probably want to consider using some of the monies you have for investment purposes.

Be it in shares, gold or real estate; investment is a great way to save even MORE money because the potential returns are usually much greater than, say, putting your money into a bank. The downside, however, is that investment involves RISKS – the risk of non-performance from your investments, or in certain cases, the risk of total evaporation of value for your investments caused by adverse market conditions.

Tips: Not all categories of investments are born equal, so you are advised to do your homework well before you engage with any kind of investment. For example: properties are considered medium-risk investments; they generally enjoy consistent growth but they also have low liquidity (i.e. not easily turned to cash). Shares, on the other hand, are considered high-risk investments; they are prone to fluctuations in value caused by volatile market, which basically means you could potentially GAIN a lot or LOSE a lot. Whichever form of investment you choose, it is best to make a genuine effort to learn about it before you commit.

Love this article? You might also wish to read about the importance of diversification in investment.

How To Save Money: 3 Common Methods

By Ching . 3 April 2013 . Money Management

EPF: Lump-sum or partial withdrawals at 55?

EPF: Lump-sum or partial withdrawals at 55?
Written by Celine Tan of theedgemalaysia.com
Wednesday, 31 August 2011 00:12
KUALA LUMPUR: Upon reaching 55, most people prefer to withdraw all their savings in the Employees Provident Fund (EPF) but more and more people are opting for flexible withdrawals (partial or monthly payments).

According to the EPF, last year, 235,931 employees made withdrawals at age 55 and 70% of the withdrawals were full withdrawals. The number of flexible withdrawals increased by 41.67% to 82,690, compared with 2009.

Choosing between withdrawing a lump sum and making a partial withdrawal depends on many factors. Financial planners say you can ask five questions when crunching the numbers for your retirement plan, not at 55.

1) What is your behaviour towards money?


Your EPF savings can be the single largest disbursement of money you will see in your lifetime. “It is something that most individuals look forward to throughout their working life. It gives them a sense of fulfilment when they receive it since they believe that it is then possible to achieve their life goals,” says K Gunasegaran, founder and licensed financial planner of Wealth Street Sdn Bhd.


If you are quick to spend money without a plan, think twice before withdrawing the whole. “Those who are not used to having large sums of money tend to get emotionally charged. It can lead to splurges on big-ticket items such as luxury cars. While the money is rightfully yours and it is not entirely wrong to benefit from your retirement savings, be aware of the consequences. If you know that you are an emotional spender, it is best to drop the idea of a lump-sum withdrawal because you have to make smart choices with the money,” says Gunasegaran.


2) Can you generate higher returns at a higher risk?
The primary concern of retirees is whether their retirement savings can sustain them throughout their golden years and generate sufficient returns to outpace inflation.

Headline inflation, as measured by the Consumer Price Index (CPI), increased to 3.3% on an annual basis in May, according to Bank Negara Malaysia (BNM). From 2005 to 2010, the average inflation rate in the country was 2.77%, reaching a historical high of 8.5% in July 2008 and a record low of –2.4% in July 2009.

For the past 59 years, from 1952 to 2010, the EPF has declared annual dividend rates of between 2.5% and 8.5%. In the past 10 years, the highest dividend payout from the EPF was 6% in 2000 and the lowest dividend payout was 4.25% in 2002. “If you are conservative and expect the EPF to continue providing decent annual dividends, opt for flexible withdrawals,” says Wong Keng Leong, practice manager and licensed financial adviser representative at Standard Financial Planner Sdn Bhd.

Headline inflation, however, is not necessarily a reflection of the rise in a household’s real cost of living. This means that the returns on your retirement savings should far exceed the reported CPI figures.


“Also, the EPF promises a minimum dividend of 2.5% per annum. If you think that you or your financial adviser or fund manager can surpass the average returns made by the EPF, consider a lump-sump withdrawal to boost your retirement nest egg,” says Gunasegaran.

When doing so, observe the associated costs such as sales charges or management fees levied by the financial professionals and financial institutions. If you decide to retain your retirement savings with the EPF, there will be a small charge that differs from year to year.


3) Would you still be paying debts at age 55?


If you will still be servicing high-interest debts at age 55, consider using your EPF savings to pare down or settle the loans. This is especially so if the interest levied is higher than the returns generated by your savings.

“High-interest debt includes credit cards [interest rate ranges from 13.5% to 17.5% a year] and personal loans [interest rate ranges from 8% to 12%]. Holding any of these debts negates any investment gains unless you are able to get superior returns on your investment over the years. Withdrawing your retirement savings, be it in a lump sum or partially, to settle your high-interest debt is a smart option but ensure that there is still some money left for your retirement, says Wong.

There is no fixed rule on how much debt you should settle. “How much you should pay off depends on the quantum of your savings. Also, it is good to check whether your debt can be restructured to reduce the interest you have to pay. If so, evaluate the financial benefit of settling this debt with a lump sum withdrawal of your EPF savings,” says Gunasegaran.


4) Do you want to control your retirement funds?

Contributors have little control over how their savings are managed and invested by the EPF, which has sole discretion on how to invest the money that they receive and the dividend (over the minimum amount guaranteed) to declare.


“If you want to take full charge of your retirement savings [either on your own or with professional help], you can do so at 55. When you take a lump-sum payment, you are able to invest in investments that may not be available to you if you were to retain your savings in the EPF [withdrawals can be made to EPF-approved local equity funds],” says Wong, who observes that most of his retired clients withdrew all their EPF monies at 55 as they were comfortable with managing their own money.


A key benefit of withdrawing your retirement savings in a lump sum is that it allows you to expose your loved ones to managing money with a long-term perspective. “At the point of death, most of us will not want to leave a large sum of money to loved ones who cannot manage it. In all likelihood, the money will be spent sooner than planned. Withdrawing your retirement savings in a lump sum at the point of retirement allows you to slowly educate your young-adult children on how to manage a big sum of money. Let them know where you keep your savings and what you are doing with it. This is an alternative to receiving a lump sum from the EPF when you are no longer around,” says Gunasegaran.


5) Do you have a plan to access your money?


If you are 55, under the EPF’s monthly payment withdrawal scheme, the board will transfer the total amount into a special account and put monthly payments into your bank account.

If you opt for a lump-sum withdrawal, how will you draw down your money to fund your lifestyle? There are two options to evaluate. Wong suggests that you should plan a draw-down strategy that includes either a quarterly or half-yearly redemption. “Note that some instruments allow you to make periodical withdrawals but may impose charges.”

On the other hand, Gunasegaran thinks that it is more advisable for retirees to put their retirement savings into annuity-like insurance plans, under which they will receive annual payments after a certain number of years.

http://www.theedgemalaysia.com/personal-finance/192209-epf-lump-sum-or-partial-withdrawals-at-55-.html

Sometimes, investors are puzzled why the EPF trades regularly between buy and sell.

Sometimes, investors are puzzled why the EPF trades regularly between buy and sell.

The presumably unclear direction of trades is because the provident fund also appoints external fund managers (EFMs) who have the full discretion to buy or sell. As such, sometimes the EPF could be buying a stock but their EFMs could be selling the same stock on the same day.

In certain cases, one EFM buys but another EFM could be selling at the same time or a few days later. Hence, the disclosure by the EPF is a combination of trades by its internal fund managers as well as that of EFMs.

Due to the difference in opinion between the EPF and its EFMs, there is no clear signal of the direction of this powerful domestic fund.

The fund could be big, but they are not "united" and they are in fact competing with each other. This is also a way to generate liquidity in the market. .

Even if the fund is buying a particular stock persistently, we observe that the stock price may not seem to rise substantially.

This may be linked to the way the orders are placed - that is, they tend to buy lower after a completed trade.

Read here.

EPF dominates 50% of the daily trading on Bursa Malaysia.

Tuesday April 6, 2010

Fund managers echo PM view on EPF trades

By TEE LIN SAY

linsay@thestar.com.my

PETALING JAYA: Fund managers agree that it is unhealthy for the Employees Provident Fund (EPF) to dominate 50% of the daily trading on Bursa Malaysia.

During his speech at Invest Malaysia 2010 last Tuesday, Prime Minister Datuk Seri Najib Razak had said the EPF’s dominance of the local equity market, with up to 50% of daily trading volume, was “not healthy” for the market or for the pension fund.

“It is no use being the biggest fish in a small pond where you can be attacked by everyone,” said a research head of a local firm.

“When this happens, your strategy is very limited and you cannot liquidate easily. It is difficult to get out, as you always need to be holding the baby. The result is sub-par performance.

“That is why it is very important for the Government to sell down its stakes in the government-linked companies (GLCs) to boost liquidity in the market,” he said.

He cited the example of Lembaga Tabung Haji, which at RM23bil, was less than a 10th the EPF’s size, and was thus nimbler and able to exit stocks easier.

Currently, the EPF has a total fund size of RM370bil and about a quarter of this is invested in the local stock market.

Meanwhile, Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said he was well aware of the challenges facing the market and was continually working with the authorities, index providers and market participants on improving free float and liquidity in the market.

“Having said that, we agree that having one particular type of investor dominating the market is not healthy for the market over the long term.

“We want to attract a diverse set of investors into our market for sustainable growth. Therefore, our current initiatives are addressing the needs and demands of a wide spectrum of investors,” Yusli said.

He said investors should also shift their mindset and look at investing in as many Bursa-listed companies as possible.

“True to the wise saying of not putting all the eggs in one basket, investors should diversify their investment strategy and not concentrate on one or a small number of stocks as this scenario is hampering liquidity,” Yusli said.

At Invest Malaysia, Najib also said the EPF would be allowed to invest more assets overseas, both diversifying its portfolio and creating more room domestically for new participants.

EPF chief executive officer Tan Sri Azlan Zainol said the pension fund planned to increase its overseas investments to 10% of the fund size over the next one or two years.

EPF declared a dividend of 5.65% for last year. This was on the back of an improved total net income of RM19.63bil, up 34.82% from RM14.26bil in 2008.

It could possibly have declared better dividends had it invested more abroad, as that would have given it more flexibility in its movements.

“It is a good thing that the EPF is going abroad. I don’t really think there is a problem of risk as the overseas exposure is small relative to its fund size and present exposure,” said a head of fixed income from an insurance fund. “Going from 6% to 10% isn’t much. So it is not increasing risk, rather a diversification and reduction of risk.”

While certain quarters said EPF was seen as the buyer of last resort for the Government’s equity stakes in GLCs, the fund manager disagreed.

“The EPF is on the ball. They know what they are doing. They will not simply take something without evaluating it first,” he said.

EPF public relations general manager Nik Affendi Jaafar said the EPF competed against other funds whenever a block of shares was offered to the market.

“In most cases, the EPF is not able to purchase shares in the quantities that we desire,” he said.

http://biz.thestar.com.my/news/story.asp?file=/2010/4/6/business/5997347&sec=business

EPF net buyer in banking stocks

EPF net buyer in banking stocks

Tags: Bank Negara Malaysia | CIMB Group Holdings Bhd | Domestic banking stocks | ECMLibra Investment Research | EON Capital Bhd | EPF | Hong Leong Bhd | Maybank | PBB

Written by Yong Yen Nie
Monday, 14 December 2009 11:41

KUALA LUMPUR: The Employees Provident Fund (EPF) has re-emerged as a net buyer in most domestic banking stocks, especially large-capped ones since November 2009, a significant shift from its net selling activities in the period prior starting in April this year.

According to latest filings on Bursa Malaysia, EPF has raised its stakes in MALAYAN BANKING BHD [] (Maybank) and CIMB Group Holdings Bhd to 808.7 million shares or 11.4% and 462.22 million or 12.9%, respectively.

A month earlier, EPF held 788.25 million shares or an 11.1% stake in Maybank and 441.68 million shares or a 12.3% stake in CIMB.

Prior to this, the statutory pension fund had pared down its holdings in Maybank and CIMB from April this year. At end-April, it had held 887.77 million shares or a 12.5% stake in Maybank and 623.48 million shares or a 17.4% stake in CIMB.

EPF also picked up PUBLIC BANK BHD [] (PBB) shares in November, raising its interests to 474.93 million shares or 13.4%, compared with 461.54 million shares or 13.1% at end-October.

EPF used to hold a 14.8% stake comprising 523.76 million shares in PBB but had pared down its stake in the banking group since end-August this year.

It also accumulated more AMMB HOLDINGS BHD [] shares and held a 13.4% stake or 405.35 million shares in the banking group as of end-November, compared with 395.38 million shares or 13.1% a month earlier.

EPF had been a net seller in AMMB shares since July. As at end-June, EPF had held 451.57 million shares or a 15% stake in AMMB.

Banking analysts said EPF was seen to be turning its focus on banking stocks, given the improved indicators in the financial sector and stronger expectations of an improved economic outlook in 2010.

A banking analyst with a local research house said several research houses had made overweight calls on the sector following banks’ better-than-expected financial results for the quarter ended Sept 30, 2009.

“With the anticipation of a stronger economy next year, EPF would want to have an investment strategy that benefits the most from the recovery,” she told The Edge Financial Daily last week.

The banking analyst added that while there was still some upside left in the banking stocks, most of them were approaching the target prices.

“(Nevertheless), we believe buying activities for banking stocks will continue for the first half of 2010, underpinned by stronger economic trends, while profit-taking would be more pronounced by June next year,” she said.

EPF had also accumulated shares in other mid-capped banking stocks, filings on Bursa Malaysia showed.

According to filings last Friday, EPF had raised its interests in HONG LEONG BANK BHD [] to 177.28 million shares or 11.2% from 171.32 million shares or a 10.8% stake at end-October.

The pension fund had also increased holdings in ALLIANCE FINANCIAL GROUP BHD [] (AFG) to 235.9 million shares or 15.24% at end-November from 226.02 million shares or 14.6% a month earlier. Filings showed EPF has been accumulating shares in AFG since end-June.

EPF slightly pared down holdings in EON CAPITAL BHD [] to 83.4 million shares representing 12.03% at end-November from 83.62 million shares or 12.06% a month earlier.

Recent Bank Negara Malaysia statistics showed that the decline in loans growth had bottomed in October, following a faster loans expansion of 7.5% year-on-year (y-o-y) compared with 7.2% in September this year.

In a report, ECMLibra Investment Research said the improving loans growth corresponded with a gradual recovery in economic conditions, as shown by a 1.2% contraction in gross domestic product (GDP) for the third quarter of 2009 (3Q09), which was healthier than 1Q09’s and 2Q09’s contraction of 6.2% and 3.9%, respectively.

“Going by the lending indicators, it would seem that there has been some pent-up demand for credit, as shown in the double-digit y-o-y changes in the applications and approval numbers.

“Net NPL (non-performing loans) ratio on a three-month basis remained unchanged at 2.1%, but has improved to 1.5% on a six-month basis (from 1.6% previously),” it said.

The research house added that the banking system’s capitalisation remained stable with risk-weighted capital ratio and core capital ratio of 14.5% and 13%, respectively.


This article appeared in The Edge Financial Daily, December 14, 2009.

EPF's total asset allocation as at Q2 2009

http://biz.thestar.com.my/news/story.asp?file=/2009/10/16/business/4916564&sec=business