The Hong Kong Capital Markets Association has urged the Government to review the Mandatory Provident Fund's (MPF) investment guidelines, which allow fund managers to expose up to 50 per cent of their portfolios to Hong Kong dollar debt instruments.
The recommendation was based on the association's belief that Hong Kong dollar debts could generate a sufficient rate of return to preserve the purchasing power of the funds within a reasonable degree of risk, a prime MPF objective.
The association's MPF Investment Guideline convenor Tony Li Shu-kun, who represents Chase Manhattan Asia, said the existing guidelines - which allowed a 100 per cent equity portfolio - were imprudent, considering the high volatility in Asian equity markets.
He said there had been a misconception that the Hong Kong dollar market was still underdeveloped and unable to provide sufficient products to meet the demand from MPF programmes.
He said 178 new Hong Kong dollar issues - excluding government-issued Exchange Fund notes - were launched last year, with an aggregate value of $80 billion, compared with the annual contribution of $40 billion estimated by the MPF Office.
Mr Li said that, for the past 12 years, Hong Kong dollar fixed-income investments had generated a return of 9.4 per cent, 0.54 per cent higher than the 8.86 per cent average inflation during the period.