MPF returns to black in February on equities rebound

Hong Kong pension fund reports 2.25pc average return last month after 2.43pc loss in January

PUBLISHED : Wednesday, 05 March, 2014, 1:38am
UPDATED : Wednesday, 05 March, 2014, 1:38am

The city's Mandatory Provident Fund is back in the black after reporting an average return of 2.25 per cent last month, thanks to a rebound in regional stock markets.

This came after the MPF suffered an average loss of 2.43 per cent in January due to weak regional stocks and currencies, according to data provider Lipper.

But the pension fund, which covers the city's 2.4 million employees, failed to outperform the Hang Seng Index, which rose 3.6 per cent during February. The 456 investment funds under the MPF had returned 8.09 per cent last year.

Principal Financial's Asia president Rex Auyeung Pak-kuen said the MPF result in February was a reflection of stable global investment markets.

"Going forward, the market could be volatile with events like the situation in Ukraine and the on-going expectation on the US Fed's interest rate policy. It is advisable to stay on the conservative side for the immediate term," Auyeung said.

Mark Konyn, chief executive of Cathay Conning Asset Management, said the MPF's positive performance last month was due to recovering sentiment in Hong Kong and Asian stock markets.

Konyn, though, warned of tough times ahead.

"We certainly expect a more difficult year in 2014 with concerns over the performance of emerging markets and rising interest rates potentially in the US as the Fed continues with its tapering of bond purchases as part of QE3," Konyn said.

"US bond yields are likely to stay volatile and in a trading range. Developed market equities have started the year strongly combining with better performing bonds to drive MPF funds higher," Konyn added.

Almost all categories of investment funds reported gains in February, ranging from the lowest gain from Hong Kong dollar bond funds at 0.51 per cent to the highest of European equity funds at 5.36 per cent. This marked a turnaround from January when almost all funds with stock exposure suffered losses, ranging from 0.03 per cent to more than 7 per cent.

Only three types of funds suffered a loss last month - Japan equities' funds declined 1.47 per cent, Hong Kong dollar market bonds shed 0.06 per cent and yuan bond funds dipped 0.69 per cent. Mixed-asset funds, the most popular choice, gained 2.6 per cent in February after losing 1.92 per cent on average in January.

Under the MPF scheme, employees are free to choose how to allocate their part of the retirement contribution among different funds.

Most chose to invest in stock funds and balanced funds that invest in both stocks and bonds, according to data from the Mandatory Provident Fund Schemes Authority.