Emerging-market stocks star in MPF rebound
The Mandatory Provident Fund rebounded strongly in the second quarter, with emerging-market equities outperforming stocks in the United States and Europe, according to RCM Asia-Pacific.
But employees were not advised to redeem early or change their investment portfolio as the market turned around, the MPF provider said.
The change of fortunes was driven mainly by the stock market rally, with Hong Kong and other Asian equities rising at a quicker pace following the mainland's stimulus package. The Hang Seng Index tacked on 17.07 per cent in May for its best month in a decade.
Balanced funds, which invest in a combination of stocks and bonds, rose more than 20 per cent so far in the second quarter, said RCM chief executive Mark Konyn. They registered a loss of 10.4 per cent in the first quarter.
Although the recent run-up in equity markets combined with mounting concerns about a global economic recovery could cap overall gains for the year, he said there would still be room for gain in the second half this year.
'We believe MPF results for 2009 will prove to be very reasonable, particularly in the context of the negative performance we saw last year,' Mr Konyn said.
He added that RCM would not be a strong supporter of removing savings early from the MPF scheme.
The critical part of long-term retirement fund saving or retirement investment is to have regular contributions and dampen the long-term impact of short-term volatility,' he said.
But Mandy Lam, managing director at OSK Securities, said those approaching retirement age could lock in profits by switching their MPF equity funds to money-market funds. The younger generation could stick to a long-term strategy, she said.
Ms Lam added that some MPF providers might not allow frequent fund switching and employees should be mindful of costs involved.
The strong rebound seen in RCM pension funds was in line with the industry performance, which has snapped the losing run reeling from the global financial crisis since April.
MPF funds rose 7.83 per cent on average in May for the largest gain since the savings scheme was initiated in 2000, according to Thomson Reuter Lipper.
Equity funds led the way, surging 12.44 per cent in May and 33.83 per cent on average over the past three months. More conservative investment classes, such as balanced and bond funds, gained 7.81 and 1.18 per cent on average last month.
'The investment outlook of equities for the medium/long term has turned positive,' said Eric Wong, the Hong Kong head of Lipper, in an earlier research report.
'However, investors must not turn complacent and believe the path to a bull market is cleared of obstacles. New concerns have emerged and can terminate the recovery of the global equity markets.'
