AI Selloff and Recession Fears: What It Means for Your EPF and Unit Trust
The Nasdaq-100 nearly entered correction territory in October. Here is how a global AI selloff does and does not change your EPF balance or unit trust value.
What happened1/7 Reuters called October's AI rout brutal; US stocks steadied on Monday
A Reuters commentary on Nov 2 described October's AI-driven selloff as "brutal", noting the tech-heavy Nasdaq-100 came close to correction territory after investors questioned Big Tech's soaring AI spending.
US stocks opened higher on Monday. The Dow rose 1.04% to 52,308, the S&P 500 gained 0.58% to 7,623, and the Nasdaq Composite added 0.72% to 25,620. Brent crude fell more than 6% on hopes of a US-Iran peace deal, easing supply fears.
Not every AI name recovered. Oracle dropped 5.8% after filing to raise US$20 billion through debt and shares. Marvell Technology fell 6.1% on its US$115 billion all-stock deal for Lumentum, whose shares slid 10.5%. Intel extended losses, down 2.6%, after its worst one-day fall since the 1980s.
The real numbers2/7 The selloff in numbers, and Monday's partial recovery
Near correctionNasdaq-100 after October selloff+1.04%Dow Jones gain on Monday, Nov 2-5.8%Oracle drop on US$20B raise filingSeven of the 11 major S&P 500 sectors closed higher on Monday, led by consumer discretionary. Energy fell over 2.1% as oil tumbled. Nvidia rose 1.5% and Amazon 4.1%, while the S&P 500 posted 26 new 52-week highs.
The rebound offered respite after a bruising October, but sentiment stayed shaky. An amended IPO filing showed Anthropic's net loss narrowed in Q3 while revenue jumped, ahead of a potential listing. US manufacturing activity picked up in October on solid domestic demand, data showed.
- 01/02
Near correction Nasdaq-100 after October selloff The selloff in numbers, and Monday's partial recovery Nasdaq-100 after October selloff
Why it matters3/7 Your EPF balance does not move with one day of US trading
EPF (KWSP) declares its dividend once a year, based on the performance of the fund's entire portfolio across equities, bonds, property and money-market instruments. A single session's US tech selloff does not change the number in your i-Akaun today.
Your monthly contribution stays the same: 11% of wages from you, 13% (wages up to RM5,000) or 12% (above RM5,000) from your employer, paid on top of your salary. Since 11 May 2024, new contributions are split 75% Akaun Persaraan, 15% Akaun Sejahtera and 10% Akaun Fleksibel.
Akaun Persaraan is locked until retirement. Akaun Fleksibel allows withdrawals any time, subject to a minimum balance. Neither account is affected by whether Nvidia rises or falls on a given Monday. EPF is a statutory retirement fund governed by fixed legal accounts, not a trading vehicle.
How it works4/7 If your unit trust holds US tech, the NAV may dip on paper
A unit trust's net asset value (NAV) reflects the market prices of the stocks and bonds inside the fund. If your fund allocates to US tech, a selloff in those stocks pulls the NAV down. That is an unrealised change on paper, not a cash loss.
You only lock in a loss when you redeem your units at the lower NAV. If you hold, the NAV can recover when those stocks recover. The size of the impact depends entirely on how much of your fund sits in US equities versus Malaysian equities, bonds or money-market instruments.
Check your fund's asset allocation in its fund fact sheet, available from the management company's website or your agent. e.g. a fund that is 5% in US tech will barely notice an AI selloff, while a fund that is 40% in it will feel the move much more.
- 02/02
+1.04% Dow Jones gain on Monday, Nov 2 The selloff in numbers, and Monday's partial recovery Dow Jones gain on Monday, Nov 2
How it affects your wallet5/7 What actually hits your wallet today: nothing from EPF
Your payslip deductions are unchanged. EPF employee share (11%), SOCSO, EIS and PCB are calculated on your salary, not on Wall Street's closing bell. The amount deposited into your EPF accounts this month is the same whether the Nasdaq rises or falls.
For unit trust holders, e.g. if you hold RM10,000 in a fund and its NAV drops 3% in a week, that is RM300 of unrealised paper movement. You still own the same number of units. The money only leaves your pocket if you redeem at that lower price.
The Reuters commentary raised recession fears, but US manufacturing data showed October activity picked up on solid domestic demand. A commentary piece is not a confirmed recession. Watch the data, not the adjectives.
What to do, step by step6/7 Four things to do before you react to the next headline
- Open the KWSP i-Akaun app and check your actual balance across all three accounts. The number you see is your EPF position, unaffected by Monday's US close.
- Download the fund fact sheet for every unit trust you hold. Look for the asset allocation breakdown: percentage in Malaysian equities, foreign equities, bonds and money-market instruments.
- Never use EPF retirement savings to trade shares or chase a market move. EPF is governed by fixed legal accounts with specific withdrawal purposes. If you want to invest beyond EPF, use savings you can afford to leave untouched for years.
- If you want a second opinion on your portfolio, find a licensed adviser on the Securities Commission's register at sc.com.my. Ask them about your fund's exposure; do not take tips from social media.
What to watch7/7 Dated events this week that could move the AI trade further
US midterm elections take place on Tuesday. Democrats are widely predicted to win the House; the Senate is less certain. Control of Congress affects spending and regulatory direction, which feeds into tech and AI policy expectations.
Earnings season continues. AMD is set to report later this week, and Apple's quarterly results are due after the bell. Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management, said the market is likely to stay volatile through earnings, with individual companies punished if they miss expectations.
Questions people ask
Does a US stock market crash affect my EPF savings?
Not directly on any given day. EPF invests across many asset classes and geographies, and its dividend is declared once a year based on the whole portfolio. A one-day US tech selloff does not change your i-Akaun balance. EPF is a statutory retirement fund, not a trading account.
What are the three EPF accounts and what can I do with each?
Since 11 May 2024, new contributions split 75% into Akaun Persaraan (locked until retirement), 15% into Akaun Sejahtera (housing, education, health) and 10% into Akaun Fleksibel (withdraw any time, minimum balance applies). Check your split in the KWSP i-Akaun app.
How do I check if my unit trust holds US tech stocks?
Download the fund's fact sheet from the management company's website or ask your agent. Look for the asset allocation section: it lists the percentage in foreign equities and, in some funds, the top holdings by country or sector. A fund with low US exposure will barely move on an AI selloff; one with heavy US tech exposure will.
Source: KWSP (EPF)ReutersMalaysiastock.biz
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