MPF returns of 1.18 pc slowest in three months, trailing HSI's 3pc

PUBLISHED : Wednesday, 04 December, 2013, 5:27am
UPDATED : Wednesday, 04 December, 2013, 10:29am

Investment funds in the Mandatory Provident Fund scheme, which covers 2.4 million employees in the city, reported their slowest growth in three months last month, with returns trailing the performance of the benchmark Hang Seng Index.

The 456 MPF funds reported an average return of 1.18 per cent last month while the Hang Seng Index rose 3 per cent, data provider Lipper reported.

The funds grew 2.13 per cent in October and 4.18 per cent in September. For the first 11 months of this year, the funds reported an average return of 8.12 per cent, well short of the 12.07 per cent gain for the whole of last year but a substantial improvement on the loss of 8.42 per cent in 2011.

All types of equities funds, mixed-asset funds and money market funds saw positive returns last month, as well as for the first 11 months of the year. However, various bond funds suffered losses last month and in the 11 months.

Asia-Pacific bond funds were the worst performers last month, recording an average 1.53 per cent loss, followed by global bonds with a 0.58 per cent loss and Hong Kong dollar bonds with a loss of 0.47 per cent.

They were also the worst performers in the first 11 months, with Asia-Pacific bond funds reporting an average loss of 4.46 per cent, Hong Kong dollar bond funds a loss of 2.6 per cent and global bond funds a loss of 2.02 per cent.

BOCI-Prudential chief executive Thomas Chan said bond markets had been hard hit by investors' worries that the United States would soon end its monetary easing policy, known as QE3, through which the US government injects money into the market to boost the economy and keep interest rates low.

"Everybody believes when the QE3 ends, interest rates will soon go up," Chan said. "This has hurt bond prices and hence the MPF bond funds performed badly."

He said the outlook for bond funds next year was not optimistic amid fears of interest rate rises in the US and Hong Kong.

In contrast, he said the stock markets in Hong Kong, Japan and the US should continue their good run from positive economic prospects for mainland China, US and Japan.

Mainland equities were the best performers last month with an average return of 5.72 per cent, followed by pharmaceutical and health funds at 4.19 per cent and Hong Kong equities at 3.11 per cent.

However, for the first 11 months of the year, the winners were Japan equities funds, which reported 31.09 per cent growth, followed by pharmaceutical and health funds at 30.45 per cent and US equities at 27.27 per cent.

"Equities funds are likely to continue to be the MPF winners next year," Chan said.