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MPF investment caps may exclude managers from subscribing to issue

Investment caps on the Mandatory Provident Fund may mean pension fund managers will not be able to subscribe to the HSBC rights issue.

And even if they are allowed to, some fund managers doubt that the bank will gain any long-term benefits from the capital-raising move. Under MPF legislation, the total amount invested in securities and other investments from a single issuer must not exceed 10 per cent of the total funds of an MPF constituent fund.

'MPF fund managers have to adhere to investment restrictions as prescribed by the law and codes,' said Sally Wong of the Hong Kong Investment Funds Association.

Mark Konyn of fund management specialist RCM said an MPF fund could invest in a rights issue if that company's stock did not breach the 10 per cent limit after the subscription.

'I believe that the rights will be counted as part of the overall 10 per cent limit,' he said. 'Therefore, some managers may choose to sell the rights depending on the position they have in HSBC after the rights are announced.'

He said RCM was studying the offering.

Rex Auyeung of Principal, another MPF provider, said the capital-raising plan would add pressure on any fund that held HSBC shares.

A Mandatory Provident Fund Schemes Authority spokesman said whether or not to take up the rights on behalf of an MPF fund would be a decision for the investment manager and scheme trustee. 'The fund manager and trustee would need to make this decision based on the interests of scheme members,' he said.

Some fund managers were sceptical that HSBC could benefit from the rights issue in the economic environment. 'We haven't seen the end of the tunnel yet,' said Benjamin Tam of IG Investment.

'And I'm afraid many investors don't want to put more money into the sector. Of course, they will tell us that there are lots of growth opportunities, but we are concerned about it,' he said.

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