AmInvestment Bank Bhd has estimated that mandatory Employees Provident Fund (EPF) contributions for non-citizen employees could channel up to RM1.7 billion in additional inflows annually into Malaysia's domestic equity market.
The bank's Sector Report notes that the estimate is based on 2.5 million foreign workers, a minimum monthly wage of RM1,700, and combined employee and employer EPF contributions of 11% and 13%, respectively. It assumes 14% of EPF assets would flow into domestic equities, as reflected in the 2023 annual report.
Prime Minister Datuk Seri Anwar Ibrahim has also urged government-linked investment companies to reduce overseas investments and prioritise the domestic market.
"This could result in net inflows to domestic equities of RM17-23 billion, compared to the past five-year average of RM2 billion between 2018 and 2023," the report stated, assuming annual equity inflows of RM30-40 billion and a maintained domestic equity market share of 57%.
For non-citizen employees, the proposed EPF contribution rate is 11% for employees and 12-13% for employers, depending on salary levels. Employees with existing contracts will see contributions start at 2%, gradually increasing to match the Malaysian employee rate within six years. The implementation hinges on amendments to the EPF Act 1991.
AmInvestment highlighted that between 2018 and 2023, the domestic equities market grew at a compound annual growth rate (CAGR) of 1% year-on-year, significantly trailing the fund management industry's 6% growth in assets under management (AUM).
"The lag stemmed from increased investments overseas, with the domestic equities market share dropping 17 percentage points to 57% in that period," the report stated.
AmInvestment also pointed out that the broader market saw its best annual return in 14 years in 2024, led by technology and plantation sectors amid supply chain realignment and rising crude palm oil prices.
"We foresee sustained structural interest in data centres, supporting a positive outlook for the construction and property sectors," it added.
