Wednesday, September 12, 2007

EPF liberalisation to benefit consumer sector

TheEdge

KUALA LUMPUR: The further liberalisation of withdrawals from the Employees Provident Fund (EPF) to make monthly payments for housing loans will benefit not just the property market but also the consumer and retail sectors, said analysts.

The move may substantially increase house owners’ purchasing power if they were allowed to settle their monthly housing instalments via their EPF funds.

“EPF contribution is expected to be around RM32 billion annually and the change can potentially release RM9.6 billion into the system. We expect this to benefit the property and consumer sector the most,” said HLG Research in a research note.

“The amount available for withdrawal is significant to the overall annual property market of RM30 billion, total housing loans of RM135 billion and the retail and wholesale segment of the economy at RM55 billion,” it said.

The government has proposed in Budget 2008 that effective Jan 1, EPF contributors could make monthly withdrawals for housing loan repayments.

Calling it a major move, the government said it would benefit five million active EPF contributors and make available up to RM9.6 billion annually for the purchase of houses.

SJ Securities Sdn Bhd research head Cheah King Yoong said there would be some indirect impact on consumer spending arising from the change, as it could create more liquidity in the market with the potentially higher disposable income.

“Any retail or consumer play, however, will only be visible in the second half of next year. Eventually, EPF contributors will take up this benefit as it could free up their cash flow.

“Most people would likely then spend a little more on leisure activities like holiday or travel, and in some cases increase retail purchases,” he said.

He said it was too early to speculate on this as the withdrawal mechanism or procedures were not clear.

The EPF, on its website, says details of the new withdrawal scheme will be announced in December.

Cheah conceded that some EPF contributors would rather use the monthly withdrawals to speed up settlement of their housing loans instead of using the facility to make part-payment of the loans.

He said among the stocks that could potentially benefit were Aeon Co (M) Bhd, Bonia Corp Bhd, Padini Holdings Bhd, Degem Bhd, Poh Kong Holdings Bhd, AirAsia Bhd, Genting Bhd and Resorts World Bhd.

Inter Pacific Research Sdn Bhd head of research Anthony Dass said while he expected the feel good factor among households to remain, the impact from EPF move arising from the monthly withdrawal would be minimal if not negligible.

“Improving employment opportunities, low interest rates, higher civil servant salaries, firm commodities prices and positive wealth effect are believed to be the main contributory factors,” he said.

“The real multiplier effect is still very tricky to assess. Certainly, the property development sector will benefit from this facility but to say others will enjoy similar boost in business will be remote,” he said.

He said individuals would possibly opt to buy better houses, or settle existing loans faster than spend on other items.


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