MPF year-end report card looks set to disappoint

The Mandatory Provident Fund reported flat earnings of 0.46 per cent last month, trailing the Hang Seng Index, failing to keep pace with inflation and on track to produce disappointing annual results, data company Lipper said yesterday.

With a return of only 1.21 per cent in the first 10 months of this year, the MPF, which covers 2.4 million employees in the city, is likely to produce a much lower annual return this year than the 8.09 per cent seen last year.

Last month's MPF return compared with a 4.6 per cent rise in the stock market's benchmark Hang Seng Index. The inflation rate for the first half of the year was 3.4 per cent but the average MPF return over the past three months has been a loss of 2.06 per cent.

Cathay Conning Asset Management chief executive Mark Konyn said the MPF had been hit hard by the poor performance of the markets in Asia, particularly mainland China and Japan.

"Regional markets have been challenged through this year due to fears of rising interest rates in the United States and slower growth in China," he said. "As such, stock markets have struggled to maintain positive momentum.

"[Mainland] Chinese and Hong Kong markets have been particularly vulnerable as further evidence of economic slowing on the mainland has been reported. This year has also proven very challenging for equity investors in Japan."

Konyn said he believed Japan would turn more positive in the next few months after the government's recent introduction of some stimulus measures. In addition, some domestic money might switch to invest in stocks rather than bonds.