Ringgit is undervalued, says EPF’s CEO

PETALING JAYA: The ringgit is currently undervalued, according to the Employees Provident Fund CEO Ahmad Zulqarnain Onn.

He remarked that while foreign exchange (FX) rates are a factor, they are not the sole deciding factor in asset allocation.

“We do feel like the ringgit is undervalued. ... FX rate is not the only factor we are looking at when making a decision to divide an asset and so forth, but it is one of the factors,“ he told reporters today during its financial performance briefing.

Concurrently, he said that when an asset is undervalued, investors tend to profit on those investments and EPF could capitalise on such opportunities by realising profits from investments.

“I’m not able to tell you in terms of notes (the investment value), because that’s confidential information but the principle is that when an asset is undervalued we tend to take profit,” he added.

EPF’s investment assets continued to record strong growth by 13% to RM1.14 trillion compared with RM1.003 trillion in 2022.

In addition, it remains the largest investor in the domestic market with an asset under management of RM702.48 billion as at December 2023, compared with RM643.38 billion in 2022. Deployment into domestic market accounted for more than 80% of 2023 investment allocation.

It has a total foreign investment asset of RM433 billion for the same period compared with RM359 billion registered in 2022.

Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the EPF’s performance showed a respectable trajectory despite overall volatility in the global markets last year.

“Generally, the announced dividends are in a respectable trajectory. If we compare to the year prior, it is on the rising trend which reflects the performance of the external markets.

“In a nutshell, there is an increase in gross income more than 20%. Moreover, the announced dividends rates are more than the inflation rates.

Concurrently, he noted that EPF has about 38% exposure in the overseas markets, meaning that the diversification strategy in EPF’s investment portfolio has come into fruition.

“If we look at the movements of the global markets and if we look at EPF’s invesments in the domestic markets, the domestic marker performance will also be impactful (towards its overall performance),“ he expressed.

EPF announced a dividend rate of 5.50% for Simpanan Konvensional, with a total payout of RM50.33 billion and 5.40% for Simpanan Shariah, with a total payout of RM7.48 billion, bringing the total payout amount for 2023 to RM57.81 billion.

The International Monetary Fund has projected that global growth will be 3.1% in 2024, below the historical average of 3.8%. Major central banks are expected to begin to lower policy rates as inflation starts to abate.

Bank Negara Malaysia has projected gross domestic product growth of 4% to 5%, driven by continued growth in domestic demand and a recovery in external demand. Global financial markets remain at risk to geopolitical developments, particularly in relation to ongoing regional conflicts.

Starting January 2024, the EPF has separated its Simpanan Konvensional and Simpanan Shariah portfolios in relation to their syariah-compliant investment, in order to allow each portfolio’s returns to be optimised in the long run with each portfolio having an independent SAA. The separation also ensures that assets under both Simpanan Shariah and Simpanan Konvensional are well diversified across asset classes, geographies, markets and industries to ensure sustainable returns.

The crediting of the dividends for both Simpanan Konvensional and Simpanan Shariah is scheduled to be completed today. Members may check their accounts via i-Akaun or get their statement from any EPF self-service terminal nationwide.