EPF equities value surges

Sources: IZWAN IDRIS ( TheStar Online)



PETALING JAYA: The value of equities held by the Employees Provident Fund (EPF) rose faster than the market over the past six months as the fund increased its stakes in battered stocks and rode on the rally that lifted share prices from their lows in March.

The latest publicly available data showed that the market value of EPF’s top 15 holdings had risen 23% since the start of the year, compared with the 21% gain in the FBM KLCI as of last week.

As a pension fund, the EPF follows a strict conservative strategy in managing its funds that had swelled to RM356bil as of the end of March.

About a quarter of this money is invested in equities, but only a fraction is allowed for overseas investment.

“Contrary to popular belief, the EPF is quite aggressive in managing its stock portfolio,’’ said a senior fund manager with a local asset firm.

EPF’s most valuable shareholding is its 930 million shares, or 15.5% stake in Sime Darby Bhd, which is also the most expensive stock in terms of market value on Bursa Malaysia.

Its current stake in Sime Darby is less than the 15.7% reported as at end of last year.

Despite the slight decrease, the value of EPF’s stake in Sime Darby had increased to RM6.67bil as at the end of June compared with RM4.97bil at the start of the year after the stock climbed 38% over the same period.

Filings with Bursa Malaysia in the past months showed that the EPF’s stake in Sime Darby fluctuated by as many as three million shares a day.

Conservative estimates of the fund’s transactions put it at about 20% of the stock’s daily volumes.

The fund is also active in buying and selling shares in other big companies where it owns substantial stakes in Tenaga Nasional Bhd, Malayan Banking Bhd and IOI Corp Bhd.

Bloomberg data showed that the EPF has stakes exceeding 10% in 47 companies as at last week.

However, there were little change in terms of the fund’s equity stakes in the country’s biggest firms over the past six months, except for Axiata Group Bhd, formerly known as TM International Bhd.

EPF’s current top 15 shareholdings have a market value of about RM55bil against RM43.7bil six months ago.

Analysts said a rising market provided the opportunity for funds like the EPF to make trading profit on stocks.

This may help boost returns from investments at a time when companies are expected to pay lower dividends as their profits shrink.

EPF had warned that this year’s dividend payout to contributors may be less than the 4.5% paid for 2008.

It has to guarantee a minimum payout of at least 2.5% every year as its fund size grows at about 7% and 10% rate annually.

Currently, the EPF is invested in more than 100 companies on Bursa Malaysia, with its 67% in Malaysian Building Society Bhd and 57% in RHB Capital Bhd comprising its biggest stakes.

The total market capitalisation of just over 950 companies on Bursa Malaysia stood at RM817bil as at end-June.

While the fund’s stakes in the country’s biggest firms remain relatively stable, it has been increasing its shares in a number of mid-size companies.

Among stocks that saw a significant jump in EPF investment so far this year was WCT Bhd.

The pension fund started the year with a 20% stake in the construction group but took advantage of a steep price plunge in January to buy more shares, raising its equity stake to 26% by end-June.

Latest filings showed that the EPF owned 25.16% of the company as at July 6.

Shares in WCT closed at RM2.23 yesterday, up 47% year-to-date.

The stock, however, was down 61% from a peak of RM4.98 achieved on Jan 11 last year.

EPF’s stake in WCT is currently worth about RM430mil compared with RM220mil at the start of the year.

The fund did not disclose the amount paid for the additional stakes in its filings with Bursa.

Other mid-sized firms that saw increased EPF interest are oil and gas counters like Dialog Group Bhd and KNM Group Bhd.

The two stocks had posted strong double digit gains this year from their recent lows in March.