KUALA LUMPUR: The Employees Provident Fund (EPF) chief executive officer Ahmad Zulqarnain Onn has hinted at potential support for the weak ringgit through repatriation of its funds.
"We do feel like the ringgit is undervalued. How we would manage our investments (is by) always making a call on the assets value," he said.
Ahmad Zulqarnain stopped short of disclosing details regarding any repatriation plan, citing confidentiality.
"I'm not able to tell you in terms of notes (foreign currencies value) because that is confidential information," he told reporters after the EPF's financial performance briefing here on Sunday.
Nonetheless, Ahmad Zulqarnain said while foreign exchange rates are not the sole factor in investment decisions, they do play a significant role.
He explained that when an asset is undervalued, the EPF tends to capitalise on such opportunities by realising profits from investments.
"The principle is that when an asset is undervalued we tend to take profit," he remarked.
As at December 2023, the EPF's domestic investment increased to RM702 billion for 2023 from RM643 billion while foreign investment rose to RM433 billion from RM359 billion registered in 2022.
The EPF's investment assets stood at RM1.14 trillion, of which 62 per cent was invested domestically and 38 per cent invested internationally.
Bank Negara Malaysia governor Datuk Abdul Rasheed Ghaffour, in a brief statement late last week, said the ringgit was undervalued and ought to trade higher given its positive economic fundamentals and prospects.
The central bank said it had stepped up engagements with government-linked investment companies, government-linked companies, corporations and investors to encourage continuous inflows to the foreign exchange market.
Responding to Ahmad Zulqarnain's comments, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said currencies market tend to overshoot its fair value and that would create a trading opportunity.
When it comes to overseas investment, the due diligence will not only cover the underlying assets but also the prospects of the currency market, Afzanizam added.
"Intermittently, there would be some trading opportunity which would allow the EPF to capitalise on it and be able to enhance the investment returns.
"Bringing back the money from overseas investment will help strengthen the value of the ringgit.
"But I suppose EPF would weigh the impact to asset-liability whenever they decide to bring back the money from overseas investment," he told Business Times on the sidelines of the EPF's briefing.
When asked about the aging population and the need for EPF to increase overseas investment ratio in the future, Ahmad Zulqarnain said the asset allocation is not based on that.
On whether the mandatory contribution rate for EPF accounts would remain unchanged with the introduction of Account 3, he said: "We do not expect a change to the contribution rate.
He added that further details on Account 3 will be announced in April. "We're still on track to that timeline."