Mandatory Provident Fund (MPF)

Top MPF fund manager recommends technology, export driven stocks

HSBC’s Asia Pacific Equity fund is the year’s top performer, returning 32 per cent, compared with market average 12 per cent

PUBLISHED : Friday, 31 March, 2017, 12:44pm
UPDATED : Friday, 31 March, 2017, 10:55pm

The top Mandatory Provident Fund manager from HSBC says he believes technology and export-oriented stocks will continue to outperform the markets.

Sanjiv Duggal, head of Asian and Indian equities at HSBC global asset management, was sharing his investment tips before the MPF implements the biggest reform in its history on Saturday.

The compulsory retirement fund is set to introduce its new default investment fund, which will adopt the simple strategy of reducing its exposure to the stock market as the employee gets older. It also has a management fee capped at 0.95 per cent, compared with the 1.56 per cent average fee across all MPF funds.

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The DIS (Default Investment Strategy) carries a lower risk but also a lower return and will be hard pressed to beat the best performer of the past year – an HSBC Asia Pacific Equity fund which has returned 32 per cent, compared with a market average of 12 per cent. The fund, set up when the MPF launched in the year 2000, has accumulated a 170 per cent return, also the best in the sector.

Many companies we identified as being high quality and having sustainable profitability were indiscriminately sold down in Asia following the Brexit referendum and US election results
Sanjiv Duggal, HSBC

Duggal, who manages the winning fund, said wise stock picks have produced good returns. But the many surprising world events last year, ranging from Brexit to Donald Trump’s election as US president, have also provided good investment opportunities.

“Many companies we identified as being high quality and having a sustainable profitability profile were indiscriminately sold down in Asia following the Brexit referendum and US election results. These events ultimately gave us opportunities to add exposure to companies we like at attractive price points,” Duggal told the Post in an interview.

As an example, Duggal said he identified good value in export-oriented consumer goods companies that were beaten up following the US election results, and bought in at low prices.

“Our stock selection in the technology sector was another highlight of our performance over the past year,” he added. “Our investments in DRAM and NAND memory manufacturers paid off as the move towards higher spec smartphones, particularly in China, saw prices for memory shoot up in the second half of 2016.” DRAM and NAND are key storage components in smartphones.

Duggal said other winners from the move to higher spec smart phones have included holdings of component makers such as camera lenses and semiconductors.

“We are overweight technology stocks as we continue to be positive on the global technology cycle. We also like consumer plays in Asia, with a preference for market leaders with strong brands. We have increasingly been adding to the energy sector over the past year and the exposure is well diversified among extractors and refiners of oil and gas,” he said.

The worst performer over the last year was the Haitong Korea fund, which suffered a loss of 7.28 per cent in the 12 months to the end of February. Though the benchmarket Kospi rose 9 per cent, the fund suffered from a 7 per cent drop in the won against the US dollar.

The same fund was the best performer in 2015, with a strong return of 21.79 per cent.

“The political uncertainties in South Korea and a strong US dollar have led to a weak won which has hurt the investment fund performance,” said Louis Tse Ming-kwong, managing director of VC Asset Management.