Tuesday, January 29, 2008

EPF move good for market

TheEdge

PETALING JAYA: The Employees Provident Fund’s (EPF) move to lower the Account 1 investment withdrawal threshold beginning Feb 1 would result in a significant flow of capital into the equity market, analysts said.

The move would release a bit more money into the market with the unit trust sector likely to benefit the most, said Kenny Yee, head of OSK Research.

“The actual impact is yet to be seen, but relaxing the ruling is good for the market,” he said.

An analyst at a local bank-backed research house said the move would mean more money for people to invest. “There will be more funds available out there.” he said.

EPF on Friday introduced its “Beyond Savings” initiative that links the threshold for Account 1 withdrawals for investment through approved institutions to the member’s age, compared with a minimum savings of RM50,000 for all ages previously.

Under the scheme, a 30-year-old member, for instance, may withdraw 20% of the amount in excess of a lower threshold of RM18,000, for investment through approved institutions. A younger member would have a lower threshold and, conversely, an older member a higher threshold.

EPF deputy chief executive officer (operation) Ibrahim Taib said the new initiative was expected to double members’ withdrawals for alternative investment from a monthly average of RM270 million to RM300 million.

He said the EPF move would give members the advantage of investing at a younger age. The change in policy would enable 1.76 million members to withdraw from Account 1 for investment elsewhere, compared with 850,000 eligible members previously.

An analyst at an investment bank said this would encourage people to diversify their investment portfolio.

“It allows them to make decisions with regards to their savings,” he said, agreeing that the unit trust sector has the most to benefit from the EPF move.

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