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Mandatory Provident Fund (MPF)

Hong Kong’s MPF pension scheme set for more good returns in 2018, Fidelity says

A positive outlook for stock markets around the world means that the fund should build on its best performance in eight years last year

PUBLISHED : Tuesday, 09 January, 2018, 9:55pm
UPDATED : Tuesday, 09 January, 2018, 11:21pm

Hong Kong’s Mandatory Provident Fund (MPF) pension scheme should continue to post good returns because of positive outlooks for stock markets in Asia and North America, according to Fidelity International, one of the top managers of the scheme.

The HK$780 billion (US$100 billion) MPF, which covers 2.8 million employees and self-employed people in Hong Kong, recorded its best performance since 2009 last year with a 20.55 per cent return, according to data from fund research company Thomson Reuters Lipper.

“While global markets have already gone through nine years of bullish runs, there are no obvious catalysts to suggest a material change in the direction of the stock market,” Terrence Kan, client portfolio strategist of Fidelity International, said on Tuesday.

Fidelity noted the outlook for bond markets across the globe was negative, with hawkish central banks and political tensions set to push yields higher.

It suggested that MPF members diversify their portfolios instead of focusing on individual markets.

“They can put more money into the Hong Kong market or China market if they like. But it’s always advisable to take a more diversified view,” said Luk Kim-ping, head of Fidelity’s Hong Kong defined contribution business.

Hong Kong’s retirement fund posts best return since 2009 with 20.6 per cent growth

Hong Kong and China equity funds were the MPF’s biggest winners last year, with the top 10 funds by performance – out of the scheme’s 469 approved funds – all invested in the two markets.

Supported by a recovery in retail sales and in the number of tourists to the city, Hong Kong equities still have potential to gain, Fidelity said. The benchmark Hang Seng Index topped global major stock markets in 2017 with gains of 36 per cent.

While the outlook for China equity funds is positive, Fidelity warned of the risks of Chinese debt securities, after yields on 10-year government bonds rose last year.

Luk also suggested MPF members set long-term plans for their pensions, especially young people in their 20s, as stock markets are volatile from year to year.

“For investments with higher long-term potential returns but higher short-term risks, like equities, compounding the potential returns is an incredibly powerful force that over time can help members grow their portfolios and protect them against inflation,” Luk said.

Fidelity International’s 22 MPF funds account for 4.6 per cent of the total value of the MPF funds, making it the eighth largest manager among the 14 scheme providers as of March 2017, according to Gadbury Group MPF Market Share Report.

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