Hong Kong’s MPF gains most in almost two years with 4.35 per cent return in January

Hong Kong’s Mandatory Provident Fund has achieved its highest monthly return in almost two years, with a 4.35 per cent gain in January.

It was the 13th consecutive month of gains for the compulsory retirement plan that covers 2.8 million employees and self-employed people in the city, according to data from Thomson Reuters Lipper.

The average monthly return of the 481 MPF investment funds was the highest since March 2016 when it reported a 5.28 per cent average gain. The MPF’s winning streak puts it on course to surpass HK$1 trillion (US$127.84 billion) in assets by 2020, from HK$843.5 billion last year.

The MPF gain was well ahead of the inflation rate, which stood at 1.6 per cent in November. 

“The strong MPF rally mainly reflects the positive sentiment in global market because of solid economic data, robust corporate earnings and less tension from geopolitical risks,” said Elvin Yu, a principal at pension consultancy firm Goji Consulting.

The performance was helped by the fact 20 per cent of all MPF assets are invested in Hong Kong equities. The Hang Seng Index rose 10 per cent in January after climbing 36 per cent in 2017, which made it the best performing market of the year globally.

“However, I do not expect such a strong rally to continue in 2018,” said Yu. “US valuations are high and the interest rate hike will start to impact the economy later this year; Europe has been doing well so far but the impact of Brexit will start to emerge as the negotiation continues.