Oxford University’s Islamic Society has issued a statement declaring their support for Egyptian protestors and demanding the immediate removal of President Mubarak.The Society states that Mubarak has been ruthlessly undermining the rights of the Egyptian people under the guise of a “three-decade state of emergency”, establishing “corruption, mistrust and enmity” within Egyptian society.Believing the protest movement to reflect the broad divergences of Egyptian society, they praise the protesters’ courage in the face of growing hostility. The statement comes among growing scepticism towards Mubarak’s desire to remain in office until elections in September to ensure a “peaceful and organised” transfer of power.
Malaysia’s Employees Provident Fund (EPF) has reported a record 58% year-on-year surge in return in the first quarter of the year, driven by equity investments.For the quarter ended 31 March, investment income reached MYR8.8bn (€2bn), compared with MYR5.6bn in the corresponding quarter in 2013.About 52% of the fund is invested in fixed income instruments, 43% in equities and the rest in money market instruments, real estate and infrastructure.Overseas exposure constitutes 21% of total investment assets. Returns from the fund’s global investments make up about 27% of all income generated.As at March 31, investment assets stood at about MYR600bn, an 11.3% increase from the year-earlier period.During the quarter under review, the fund’s equity portfolio was the biggest contributor, generating an investment income of MYR4.8bn, compared with MYR1.9bn in Q1 2013.Chief executive Datuk Shahril Ridza Ridzuan said: “High trading volume and liquidity in the equity markets, particularly global developed markets, provided us with timely opportunities to realise gains from earlier equity investments.“In addition, we benefited from a steady stream of dividends received from the listed companies we invested in.”Income from real estate and infrastructure increased by 37%, while returns from loans and bonds climbed 4%.The EPF said the marginal increase in income was primarily due to maturing investments reinvested at lower rates given the low interest rate regime.Income from Malaysian government securities and equivalents increased by 4%, while money market instruments contributed almost MYR80m in the quarter under review.Commenting on the outlook for the rest of the year, Shahril said: “Although we are optimistic the Malaysian economy will record better growth this year on expectations of export recovery supported by resilient domestic demand, we remain vigilant, particularly over the uncertainties surrounding the movements of capital as long-term interest rates adjust following recovery in key markets.”
He also warned that asset managers were facing increased scrutiny from regulators, as the authorities feared that some products might suggest a liquidity that did not really exist.A similar concern was voiced at the Swiss Pension Conference outside Zurich a few weeks ago.However, Joachim Fels, managing director and global economic adviser at PIMCO, warned that, while the banking system had become “much more stable” in recent years, it was now more vulnerable when it came to liquidity shocks, as banks were holding more capital in reserve.According to the results of PIMCO’s latest Secular meeting held on the long-term economic outlook each May, institutional investors are likely to continue to have to search for alternatives to traditional bonds in the years to come.PIMCO’s analysts predicted that the neutral, real base rate for government bonds in developed countries would hover around 0% over the next 3-5 years, once central banks found the “right level” to balance out investments and savings.“We have probably seen the bottom of the trough regarding interest rates in Europe now,” said Bosomworth.PIMCO’s analysts estimated that basic yield would only be increased by an inflation premium, most likely the 2% set by the European Central Bank as target inflation, and a duration premium of 0.5-1% for 10-year-bonds on average.Nevertheless, Fels said he did not anticipate a “great rotation” from bonds into equities, predicted by many in the current low-interest-rate environment.“Some investors shifted a part of their portfolios into equities, but volatility remains a problem for many,” he said.Bosomworth added that not all companies could “get money on the stock markets”, while governments had to continue to issue bonds.He pointed out that, even with low interest rates, there was still demand for government debt.Fels added: “Government bonds with low yields can be compared with an insurance premium, [where] investors pay for the low default risk.” The debate over institutional investors’ increasing role in providing finance for long-term projects has “steered in the wrong direction”, according to Andrew Bosomworth, managing director at PIMCO Germany.He said the term ‘shadow banks’, used for these investors by some critics and regulatory authorities, was an “exaggeration” and argued that institutional investors bore no resemblance to the unregulated banks for which it was coined decades ago.Austria’s finance minister recently repeated criticism voiced by the International Monetary Fund that unregulated institutional investors risked “distorting” the lending market.PIMCO’s Bosomworth, however, pointed out that, because banks could no longer provide capital on the same scale as they did before, “someone else has to step in”.