KUALA LUMPUR: The Employees Provident Fund (EPF) is taking a cautious stand on the local equity market performance next year.
Its chief executive officer Datuk Shahril Ridza Ridzuan said there is always be reversals in market direction and market sentiments, citing it has been on a bull-run for a longer time.
"In 2018, we have to take some cautions with the potentially given of the global site as the central bank starting to heighten interest rate," he said at a press conference on enhancements to EPF policies and schemes here today.
He said the euphoria in the equity market may start to disappear as its valuations might be a bit more rational.
"Malaysia is very dependent on the growth of corporate profits, which have been reasonably okay this year," he added.
Shahril Ridza expects corporate earnings to progress well next year, however, there are concerns that may affect the prospect.
"The growth in equity market on global and domestic basis has much better performance this year than 2016," he said.
He said FTSE Bursa Malaysia KLCI and ringgit still have some rooms to strengthen.
Overseas investment wise, he said EPF's global assest return for the past three years had grown 11 per cent annually.
EPF expects to increase its allocation for overseas investment to 32 per cent by end-2019.
Currently, EPF's majority investments in the United States are largely in the equity market.
"We are also looking at furthering our infrastructure investments for good steady return.
"For example, in Malaysia we have invested in Tenaga Nasional Bhd and highway operator PLUS Malaysia Bhd.
In Europe, EPF invested in infrastructure asset like airport and power distribution.
He said overseas investment is subjected to right instrument and tax exemption.
"It is part of the discussion with the government and US government to include instrument of tax exemption for pension funds," he said.
Asked on how the Battersea redevelopment would give internal rate return, Shahril Ridza said the first phase had been extremely well accepted.
"Now it's in the second phase construction project involving Apple's headquarters, retail and high-end housing.
"In terms of overall return, I think it is not fair to talk about it at this point in time," he said.
Shahril Ridza said EPF would want to take a longer term return of the project.
"We will look at the overall development Battersea project including various phases.
"Battersea is full compliant with affordable home requirements based on the approval by the local council," he said.