This Week at a Glance…

i) The Employees Provident Fund (EPF) has declared a dividend of 5.50% for conventional savings and 5.40% for Shariah savings in 2023.

The total payout amounted to RM57.8 billion - the highest in EPF’s history.

ii) Bitcoin gained 25% in a week, topping $64,000 as Halving event nears.

The flagship cryptocurrency is now only 8% away from its all-time high of $69,000 in November 2021.

iii) SST 8%: Prepare to see an increase in your electricity bills if you use more than 600 kWh (RM220) a month.

Experts believe that the SST hike is expected to cause a spike in overall prices, though the government says otherwise.

Scroll down to read the details.

Best Fixed Deposit Rates (March 2024): Earn up to 3.80% pa

RHB is currently the winner for the highest yield in fixed deposits. The bank is offering 3.80% pa for a 6-months tenure, with a minimum deposit of RM1,000.

If you’re looking for a shorter tenure (3 months or less), Public Bank and CIMB are neck-in-neck. Both are offering 3.60% for 3 months.

View the best FD rates for March here.

EPF: 5.50% for Conventional Savings and 5.40% for Shariah Savings in 2023.

The latest payout is slightly higher than 2022’s payout of 5.35%, but is lower than the fund’s 5-year annualized return of 5.65%.

According to Chairman Ahmad Badri Zahir, equities were a significant driver of the retirement fund’s performance in 2023.

53% of the gross income, which totaled RM67.4 billion, came from foreign assets, while the remaining 47% was from domestic assets.

The dividend is expected to benefit more than 16 million members, with the total payout amounting to RM57.8 billion (or 85.8% of gross income).

“Historically, EPF’s payout ratio ranges somewhere between 90-95% of their gross income. However, this year, the payout ratio dropped to 86%, indicating that the retirement fund is perhaps ‘saving for a rainy day,’” Hann Liew, the founder of RinggitPlus said.

Should EPF adhere to their previous payout ratio, the dividends could’ve easily hit 6.00%, which would set a different impression compared to 5.50%.

Sure, 5.50% is not bad, but…

It is barely enough to keep up with the depreciation of the ringgit. 🥲

In 2023, the local note declined by 4.13% against the US dollar and 5.75% versus SGD.

If we couple that together with Malaysia’s inflation (1.5% in December), EPF’s returns are practically negligible.

Should EPF increase its investment overseas to maximize returns?

As of September 2023, EPF’s total assets stood at RM1.092 trillion, in which 37.7% were invested overseas.

Despite the lower weightage, overseas assets generated RM6.55 billion (or 45%) of the total investment income in Q3.

This begs the question: should the retirement fund increase its overseas exposure to get higher returns?

Hann Liew weighed his thoughts on the matter, explaining that EPF, being a low-risk retirement fund, has to adhere to its own risk profile, which is a 60/40 strategy (60% local and 40% overseas).

Unless you’re planning to retire in a foreign country, adopting EPF’s strategy could be a good way to diversify your portfolio.

Bitcoin Hits $64,000: all-time high in the making?

In the past week, Bitcoin surged 25% to a 28-month high of $64,000.

On a year-to-date basis, the flagship cryptocurrency has gained 41.89%.

Only 7 out of the previous 31 days has Bitcoin took a breather - the rest were green candlesticks, bringing Bitcoin ever closer to its all-time high of $69,000 in November 2021.

Analysts believe that traders are positioning themselves ahead of the Bitcoin halving, which is scheduled to happen somewhere in April.

In simple terms, the halving slashes the rewards given to all Bitcoin miners by 50%. This process is unalterable and occurs every four years.

Hann: “Imagine you’re the only oil producer in the world, and every four years, your yield drops by half. What will that do to oil’s scarcity and price?”

Though the halving generally signals the beginning of a new upward cycle, Hann said that it’s best not to trade the event, as past performances are not indicative of future performance.

Other reasons for the surge include increased trading volume from the recently approved ETFs and MicroStrategy acquiring more BTC.

Michael Saylor’s company is now one of the top companies that hold the most Bitcoins - 193,000 BTC valued at $10.8 billion.

“How can I position myself into a volatile asset like Bitcoin?”

Hann: “Don’t focus on prices. Focus instead on your target allocation.”

For low-risk investors, a 1-3% allocation is proven to lower the overall risk of your portfolio while maximizing returns.

High risk investors can go up to high single digits, but no more than 15% of your portfolio.

Those who have 0% exposure should look to invest part of their target allocation as soon as possible.

If your goal is to have 3%, then enter 1.5% (or a percentage you’re comfortable with) and see how the market goes.

Naturally, if Bitcoin underperforms over the next few months, its weightage will drop in your portfolio, prompting you to allocate more and rebalance.

This strategy also works if Bitcoin outperforms - its weightage will exceed your target allocation, which is a signal for you to take profits and rebalance.

Be prepared to pay more for your electricity bills (and everything else).

Starting 1 March, you will have to pay 8% SST (previously 6%) if your electricity bill is more than RM220/month or 600 kWh/month.

Those who are using hybrid or fully electric vehicles (EVs) may find a slight increase in their TNB bills.

The ministry said the new tax imposed is expected to affect only 15% of domestic electricity users.

The additional SST is progressive and will not be charged for the whole amount.

For example, if your bill is RM300 (or 725kWh), the SST will only be levied on the additional RM80.

Will the SST lead to price hikes?

This is for certain. The only thing that is uncertain is to what extent.

Even though the SST increase does not affect the F&B industry (coffee shops, restaurants, etc.), these businesses use other services too.

Those who have tight margins will have no choice but to pass the burden to consumers, while some may use this as a perfect excuse to increase prices.

That’s all for this week’s newsletter!

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.

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