SCwatch


EPF’S SEEMINGLY CRACKER OF A RESULT FOR THE 3RD QUARTER 2011 : ANOTHER SLEIGHT OF THE ACCOUNTING HAND?
December 24, 2011, 12:31 pm
Filed under: Corporate Governance, Malaysia politics, Rakyat's concerns | Tags: , ,

It was with the thought of the Olympus accounting scandal in mind when I read the newspaper report about Malaysia’s Employees’ Provident Fund making a stupefying profit of RM6.8 billion for the 3rd quarter in 2011.

Of course, assuming from a wage earner’s point of view, many would hope and pray that those figures to be true.

But are they?

It becomes a further concern when you note the way EPF’s RM452 billion of funds have been utilised as follows:

a) Malaysian Govt Securities  – RM123.5 billion (27.3%)

b) Loans & Bonds  – RM150.8 billion (33.9%)

c) Equities  – RM153.3 billion (33.9%)

d) Money Market Instruments  – RM22.5 billion (4.99%)

e) Properties  – RM1.9 billion (0.4%)

Let’s not forget that EPF has already been reported to be the largest player in the Malaysian equity and debt markets.

A Bank of America Merrill Lynch report said that EPF has literally become the market in its research paper: ‘Malaysia: The EPF’s Omnipresence’.

What is more worrying is that 67% of its RM452 billion is invested in equity and debts.

It becomes more revealing when EPF has an equity holding of about 19% of the market capitalisation of the companies listed in Bursa Malaysia.

This may not sound big in relative terms but this holding is the ‘liquid’ portion of shares held by EPF – i.e. they are shares that are constantly traded by EPF ….. in order to support its price.

The non-traded portion of these big cap companies (read: GLC) are held by the likes of Khazanah, PNB etc.

In the bond market, its dominating presence has hindered development of a vibrant secondary market. The EPF owns some 45% of the outstanding Malaysian Government Securities.

Therefore if you add the MGS to those invested in equity and debt, that would come to a whopping 94% of the funds of EPF!

One can clearly see why the government cannot afford to have a collapse in the capital and debt markets ……. hence the active buying and selling of shares in Bursa Malaysia by EPF …… in possible ‘cooperation’ with  other agencies like PNB, KWAP (govt pension fund) and the likes ….. on a ‘I scratch your back, you scratch mine’ arrangement.

Is that how EPF got the RM6.8 billion return for the 3Q 2011?

And with the government debt at a level that puts in on  track with countries like Greece, I shudder to think of the repercussions.

Repercussions …… if the nonsense is allowed to continue.

What nonsense?

The illicit outflows, corruption and financial mis-management …… especially the kind where individuals think that they are entitled to unfettered riches just because they have served the government one way or the other.

That, by the way, is called cronyism!!

Coming back to the EPF, one would really wonder if it would have the ability to redeem the claims of its members when they reach retirement age.

This is when I recall then Finance Minister, Tun Daim Zainuddin, proposing (which was thrown out due to political pressure) that EPF members be paid an annuity on retirement ….. as opposed to a lump sum payment.

Of course, the excuse he gave then was that many pensioners finish their retirement funds shortly after withdrawal.

But is that the truth …… or a red herring to cover the inability of the EPF to fund these withdrawals since they have been used to fund government spending on operational matters, buying shares from out-going foreign investors in order to support the local cronies and to provide long term funding to entities to buy cows and condominiums?!!

With EPF as it is now …….. who’s next?

Petronas?

Has it got something to do with former Petronas head honcho, Hassan Merican plying his profession overseas?


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