EPF special withdrawal may trigger higher net selling from local institutional funds - Research houses

CGS CIMB said the potentially higher net selling from local institutional funds was due to the requirement for the EPF to raise liquidity for possible withdrawals by its members.

"Year-to-date 2022 up to March 15, local institutional investors had been the largest net sellers of Malaysia's equities with a net sell flow of RM5.6 billion, against 2021's net sell flow of RM12.1 billion," it said in a note today.

The research house said the special EPF withdrawal scheme would nevertheless help boost consumer spending power ahead of the upcoming Aidilfitri festival on May 2 and 3, even as the prices of products were rising amid higher commodity, labour and freight costs.

"Potential beneficiaries are the consumer, travel and healthcare sectors as they will benefit from higher domestic consumer spending ahead of the festive season and the reopening of Malaysian borders on April 1," it added.

Meanwhile, AmInvestment bank said the withdrawal would affect the sector positively as additional liquidity will likely trickle down, spurring demand for consumer goods and provide further support to consumer spending in the near term.

However, the research firm said the impact is likely to be softer compared to previous withdrawals and given the gradual pick-up in economic activities, the number of contributors that is still struggling economically from the pandemic may have been reduced while others might avoid further unnecessary withdrawal from their retirement savings.

"Besides, after several withdrawals in the past two years, consumers may need some time to replenish their savings. Hence, there would not be as many contributors making withdrawals this time round," it added.

Hence, AmInvestment maintains "overweight" on the consumer sector.

To recap, the special withdrawal of RM10,000 represents the fourth special EPF withdrawal scheme to have been approved by the government to help needy Malaysians since the start of the pandemic.

The previous withdrawal schemes of EPF contributions were namely i-Lestari, i-Sinar and i-Citra with total withdrawals amounted to RM101 billion involving 7.34 million contributors since COVID-19 hit the country two years ago.

These withdrawals left 6.1 million members with less than RM10,000 in their EPF accounts.