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Showing posts with label ELIM POON. Show all posts
Showing posts with label ELIM POON. Show all posts

Monday 20 March 2023

EPF - Keeping it safe and sound

 

 
 

The 5.35% dividend announced last year would have ranked the EPF 22nd in terms of return. — Bloomberg

Rate of return from the retirement fund well above domestic headline inflation rate

RECENTLY, the Employees Provident Fund (EPF), the nation’s largest pension fund, declared a dividend rate of 5.35% for conventional savings for 2022.

This was a lower sum compared with 2021’s 6.1%. Over the course of a decade, EPF dividends for conventional savings had ranged from a low of 5.2% in 2020, to a high of 6.9% in 2017.

The perennial question has been just how does the dividend by the EPF compare with individual asset class funds like unit trust which allows investors to gain bigger exposure in their investments by diversifying their asset holdings.

Whitman Independent Advisors founder and managing director Yap Ming Hui says while some unit trusts can provide investors with a higher return than EPF ranging from 15% to 20%, the fund volatility is also high where unit trusts’ returns can fall as much as 30% to 40% in a short time.

“There are many types of unit trusts, namely the equity unit trust, fixed income unit trust, and money market unit trust. If you have a long term view on the investment, say 10 to 15 years, then equity unit trust would have better returns than the EPF.

“Generally, the returns for equity investments are higher than fixed income assets like bonds. Hence, the rate of return and risk levels are dependent on the type of unit trusts that you buy into,” he told

For 2022, EPF’S total gross investment income came in nearly 20% lower year-on-year (y-o-y) at Rm55.3bil compared with Rm68.9bil in 2021 due to the vagaries of the capital markets at home and abroad.

Foreign investment contributed 45% of the EPF’S total gross investment income and made up about 36% of the EPF’S investment assets.

In terms of asset allocation, 47% of EPF’S investment assets were in fixed income instruments in 2022, while equities made up 42%.

Real estate and infrastructure as well as money market instruments took up a 7% and 4% stake in EPF assets, respectively.

Last year, Rm30.5bil, or 55% of the EPF’S total gross income derived from the equities asset class. This was a 26% y-o-y decline from the Rm41.1bil recorded in 2021. Foreign listed equities were the main driver for this asset class, registering a return on investment (ROI) of 9.3%.

The premier retirement savings fund has nearly half of its total asset allocation in fixed income instruments which includes Malaysian Government Securities (MGS) and equivalents along with loans and bonds. This portfolio contributed an Note: List of unit trusts launched prior to 2018 Returns in the calendar year 2022. Source: Novagni Analytics graphics income of Rm18.2bil, or 33% of the EPF’S total gross income.

Moreover, the real estate and infrastructure portfolio recorded an income of Rm5.6bil with an ROI of 10.5%, whereas gains from money market instruments stood at Rm1bil with an ROI of 3.5% in 2022.

The EPF dividend when compared with the list of 681 unit trusts generally has performed well.

With the exception of 2019 and 2020, the dividend paid by the EPF in 2018 and 2021 puts the retirement fund dividend in the top 25% of the unit trust industry.

The 5.35% dividend announced last year would have ranked the EPF 22nd in terms of return. The same could be said when EPF returns are pitted against the other 108 mixed assets (balanced funds) in the country.

The year 2018 was EPF’S best performing year as its returns were the highest when compared with balanced funds. Apart from 2019 and 2020, the dividends issued by EPF were in the top 20% of the balanced fund market. Last year, EPF ranked eighth for its return rate.

- The Star Malaysia18 Mar 2023By elim POON elimpoon@thestar.com.my 

 

EPF a more stable investment option than unit trusts

Financial Planning Association of Malaysia chief executive officer Linnet Lee states the EPF is a more stable investment option than unit trusts as it has a track record for its return rate.

“As soon as a person takes his or her money out of the EPF or their bank account, this person must understand that there are risks already, namely market risks, interest rates fluctuation, and currency exchange risks for funds that have overseas investments.

“The EPF has lower risk levels as it is obligated to provide a minimum dividend rate of 2.5%, as outlined in the EPF Act 1991, even if market conditions do not look good. For the last 10 years, the EPF’S dividend rate has always been above this level,” she says.

Despite the bearish and volatile markets last year that led to EPF’S lower gross investment income performance, the EPF’S return rate in 2022 outmatched many unit trusts and financial market’s performance.

Morgan Stanley Capital International (MSCI) World Index for instance, recorded a 17.7% decline in its 2022 performance while the MSCI Emerging Markets Index fell by 19.74% last year.

On the other hand the FBM KLCI shed 72 points or 4.6% y-o-y in 2022, with a high of 1,618.5 and a low of 1,373.4 for the year.

The rate of return from the retirement fund was also well above the domestic headline inflation rate averaging at 3.3% last year as well as the return on the 10-year MGS which yielded 4.07% at the end of 2022.

However, some may argue that unit trusts offer greater flexibility in terms of investment and contributions, as investors are exposed to different investment themes matched with their risk appetite.

The common investment products offered by unit trusts are money market, fixed incomes, property, and equities.

On this note, Tradeview Capital Sdn Bhd portfolio manager Ng Tzyy Loon says while this may be the case, many individuals do not have time to do the necessary research before buying an investment like unit trust.

“For these investors, the EPF is a very convenient tool which often becomes their default choice. It is actually not an easy feat for EPF to be able to deliver a consistent return of 5% to 6% over the years, given that the fund size the organisation is managing is about RM1 trillion,” he says.

In choosing the right unit trust, Ng opines that investors should opt for one that has a more flexible mandate and outperforms its investment benchmarks.

“Investors need to have the mindset that they are taking risks to get a better return when they opt for unit trusts instead of the EPF. A unit trust with a flexible mandate means that the fund manager has more room to make investment decisions in different market conditions.

“For example, fund managers can avoid gold mining companies in an equity unit trust, unlike in a commodity unit trust, should prices of precious metals fluctuate in a particular year.

“Additionally, a unit trust that has consistently outperformed its investment benchmark is reflective of the skillfulness of the fund manager in managing the fund,” he says.

Nevertheless, as Yap pointed out, investors need to take into account the various fees and expenses, which can potentially reduce returns, accompanying a unit trust fund. There are altogether three main fees when buying a unit trust; sales charge, fund management fee, and trustee fee.

“Sales charge are front end fees that can go as high as 5.5%. There is also the fund management fee of about 1% to 2%. Lastly, investors are also charged with a trustee fee of less than 1%,” he says.

While it seems that there are no outright fee charges for EPF members, the returns received by account holders is net expenses.

“All the expenses incurred from hiring analysts, fund managers, and compliance-related are reflected in the income statement. These fees can be lower that that of unit trusts” says Ng.

All in all, having a well-diversified portfolio is the key to protect one’s wealth, notes Lee.

“If you are looking to build a retirement nest egg, you need to diversify your money into different asset classes. Hence, it would be good to make contributions in the EPF and at the same time invest in unit trust funds,” she says. 

 - The Star Malaysia18 Mar 2023 

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Thursday 16 March 2023

Oppstar soars 225% on ACE Market debut, makes sterling debut on ACE Market

From left: Oppstar chief financial officer Chin Fung Wei, independent non-executive director Datuk Mohd Sofi Osman, independent non-executive chairman Datuk Siti Hamisah Tapsir, executive director and CEO Ng Meng Thai, executive director and chief technology officer Cheah Hun Wah, chief operating officer Tan Chun Chiat, independent non-executive director Datuk Margaret Yeo and independent non-executive director Foong Pak Chee 

Oppstar soars 225% on ACE Market debut

 

KUALA LUMPUR: Oppstar Bhd made its debut on the ACE Market of Bursa Malaysia at RM2.05 a share, a 225.4% premium over the issue price of 63 sen a share.

The stock was the most actively traded with 19.26 million shares exchanging hands.

The integrated circuit design service provider successfully raised RM104.25mil from the initial public offering exercise via the issuance of 165.48 million new ordinary shares.

Oppstar will utilise RM50mil to expand its workforce and RM25.00mil for the establishment of new offices both locally and regionally.

Meanwhile, another RM12mil will go towards research and development expenditure along with RM12.65mil for working capital.

The remaining RM4.6mil will be allocated for its listing related expenses.

“Our vision for the company is simple and clear and it is to show the global players that Malaysia is not only known for its back-end semiconductor value chain, but also has the capability to go into front-end semiconductor IC design.

"I am proud to say that we now serve clients in countries such as China, Malaysia, Japan, Singapore, as well as the USA.

"As we gradually progress, we continually ask ourselves what we can do to expand our business and continue to build up Malaysia’s profile in the front-end semiconductor space. This was where the rationale to go for a listing came about leading up to this today," said Oppstar executive director and CEO Ng Meng Thai said in a statement. 

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Oppstar makes sterling debut on ACE Market

 

PETALING JAYA: Oppstar Bhd will focus on building its human resource capital post-listing, as the technology sector is set to grow from the opportunities presented by 5G, artificial intelligence and the Internet of Things.

The integrated circuit design service provider’s chief executive officer Ng Meng Thai said the bulk of the proceeds raised from Oppstar’s listing on the ACE Market of Bursa Malaysia yesterday would be used for the workforce expansion.

“At the moment we have 220 engineers and we have plans to increase that number to 500 in the next three years. With an enlarged workforce, we also hope to grow our revenue and profitability accordingly,” he said after the company’s listing yesterday.

The group is collaborating with various universities in the country to secure future design engineers.

“We started a programme in 2020 where we hire third-year university students for three months. They work part time for 20 hours a week and are paid RM1,500 a month. Upon graduating, they are required to work for us for a year. This is how we build our talent pool.

“When it comes to business, the multinational corporations (MNCs) are our customers. However these MNCs become our competitors when it comes to hiring. This is why other than fundraising, our objective in carrying out the listing exercise is also about hiring and retention,” said Ng.

Oppstar raised RM104.3mil from the public issue of 165.48 million new shares. The company made its debut in the market opening at RM2.05 per share, or a RM1.42 premium above the offer price of 63 sen per share.

The stock closed its maiden trading day up 285.7% or RM1.80 higher at RM2.43 a share. The share price hit a high of RM2.95 and a low of RM2 in intraday trade. Oppstar’s listing did not have an offer for sale of shares from its shareholders.

Oppstar chief financial officer Chin Fung Wei said the group intends to implement a long-term incentive plan of up to 15% of the total number of issued shares of the company for its employees.

“Prior to our initial public offering (IPO), we already had more than 20 shareholders. In fact, every one of our employees, except for those that came on board after the IPO’s closing date, is a shareholder of the company. This is one of our remuneration methods for our employees, apart from their monthly salary,” he said.

Ng added the group’s listing showed Malaysia was not only known for its back-end semiconductor value chain, but also had the capabilities to go into front-end semiconductor integrated circuit design.

“We serve clients in countries such as China, Malaysia, Japan, Singapore, as well as the US. Our expansion plans will enable us to groom future talent and grow our geographical presence which will progressively help strengthen Malaysia’s front-end semiconductor ecosystem in line with our vision,” he said.

The group plans to payout at least 25% of its annual earnings as dividends. AmInvestment Research said the US-China trade war bodes well for Oppstar because China is compelled to develop its own semiconductor capabilities. 

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