Mandatory Provident Fund (MPF)

Hong Kong’s MPF gains most in almost two years with 4.35 per cent return in January

Hong Kong’s compulsory retirement scheme gains for a 13th straight month, with Chinese equity funds the biggest winners

PUBLISHED : Monday, 05 February, 2018, 12:56pm
UPDATED : Monday, 05 February, 2018, 11:05pm

Hong Kong’s Mandatory Provident Fund has achieved its highest monthly return in almost two years, with a 4.35 per cent gain in January.

It was the 13th consecutive month of gains for the compulsory retirement plan that covers 2.8 million employees and self-employed people in the city, according to data from Thomson Reuters Lipper.

The average monthly return of the 481 MPF investment funds was the highest since March 2016 when it reported a 5.28 per cent average gain. The MPF’s winning streak puts it on course to surpass HK$1 trillion (US$127.84 billion) in assets by 2020, from HK$843.5 billion last year.

The MPF gain was well ahead of the inflation rate, which stood at 1.6 per cent in November. 

“The strong MPF rally mainly reflects the positive sentiment in global market because of solid economic data, robust corporate earnings and less tension from geopolitical risks,” said Elvin Yu, a principal at pension consultancy firm Goji Consulting.

The performance was helped by the fact 20 per cent of all MPF assets are invested in Hong Kong equities. The Hang Seng Index rose 10 per cent in January after climbing 36 per cent in 2017, which made it the best performing market of the year globally.

“However, I do not expect such a strong rally to continue in 2018,” said Yu. “US valuations are high and the interest rate hike will start to impact the economy later this year; Europe has been doing well so far but the impact of Brexit will start to emerge as the negotiation continues.

“Asia including Japan looks fine but with a high base effect from strong growth last year, I don’t expect the market can repeat this rally.”

The MPF returned 20.55 per cent return in 2017, the strongest performance since 2009, on the back of the stellar performances of stock markets across the world.

Equity funds, the most popular investment choice with 42 per cent of employees picking them, were still the biggest winners in January after ranking top among all funds last year.

The data showed that Chinese equity funds were the biggest winners, returning an average of 14.02 per cent in January, with Hong Kong equity funds in second place with an average return of 9.6 per cent.  Funds investing in the stock markets of Asia Pacific, excluding Japan, saw returns of 6.04 per cent, while US equity funds gained 5.55 per cent.

Mixed-asset funds that invest in stocks and bonds reported an average return of 5.26 per cent in January. They accounted for 37 per cent of all MPF assets, the second most popular choice among employees enrolled in the scheme.

Hong Kong dollar bond funds were the only type of fund to report a loss, falling 0.67 per cent. Money market funds achieved a modest return of 0.12 per cent.

The Mandatory Provident Fund Schemes Authority (MPFA) is studying ways to improve the usage of the funds, including the possibility of allowing first-time buyers to use their savings to buy a home. 

First-time buyers in Hong Kong may be allowed to use MPF savings to buy a house … but don’t hold your breath