MPF's rise biggest since May 2009
The stock market's bounce back last month helped the Mandatory Provident Fund achieve its best performance in more than two years.
The city's pension fund turned around from a losing third quarter and reported its strongest monthly earnings since May 2009. But analysts warn of tough times ahead.
The 417 funds in the compulsory retirement scheme gained an average 6.64 per cent from a 12.25 per cent loss in the third quarter - including a 7.75 per cent decline in September and 5.27 per cent drop in August, according to Lipper, which is part of the Thomson Reuters group.
The October figures are the strongest monthly growth since the MPF gained 7.83 per cent in May 2009 following the global financial crisis.
Despite the bounce, MPF investment funds still lost an average 5.29 per cent for the year to date.
Desmond Ng, Asia ex-Japan chief operating officer and head of sales and marketing at Invesco Hong Kong, said the MPF was benefiting from the strong rebound in investment markets in October.
All the main stock markets invested in by the MPF funds, including in Hong Kong, the mainland, Asia, North America and Europe, posted double-digit gains. The FTSE Hong Kong Index rose 14 per cent after losing 23 per cent in the third quarter.
'Investors chased stocks that were oversold,' Ng said. He said the markets also benefited from a temporary resolution of the Greek sovereign debt problem and Premier Wen Jiabao's speech last month about a possible macro policy adjustment.
'In terms of outlook, we see headwinds against Asian equities in the near term,' Ng said. 'The latest export data points to a mild slowdown in economic growth.
'Robust domestic demand has offset weakness from the external sector, but there are signs that domestic demand has plateaued.'
Mark Konyn, chief executive of Asia-Pacific at RCM, said that despite the improved sentiment and relief that a solution to the euro crisis was nearing, unanswered questions remained.
Konyn said Greece, where a referendum is planned on the agreed bailout package, may only be one of many roadblocks ahead. 'Fundamentals point to the market edging higher in the coming months, but the macro-level uncertainties imply volatility that could see markets retest their lows,' he said.
The MPF scheme, which totalled HK$384.48 billion in funds at the end of June, requires employers and employees each to pay 5 per cent of salaries, up to a maximum of HK$1,000 a month each, into schemes run by banks, insurance firms or fund companies. The money is invested in different funds chosen by employees.
Best performing last month were equity funds, with an average gain of 10.56 per cent growth compared with a 12.01 per cent loss in September and 8.81 per cent in August. Equity funds were the second most chosen investment option in the MPF, representing 36 per cent of all assets.
Mixed asset funds including stocks and bonds - the most popular choice, representing 43 per cent of all MPF assets - gained 6.1 per cent last month, compared with a loss of 7.51 per cent in September and 4.97 per cent in August.
