Hong Kong’s pension fund posts 4.5 per cent investment gain in first half, but policy and regulatory challenges lie ahead

The Mandatory Provident Fund generated about HK$11,690 per member in the first six months of 2021, Refinitiv data shows

US stock funds were the best performers while Hong Kong equity funds matched the Hang Seng Index’s performance

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The Central financial district in Hong Kong. The Hang Seng Index slumped 2.9 per cent on Thursday, erasing all of its gains this year. Photo: Nora Tam

Published: 10:56am, 9 Jul 2021Updated: 11:21pm, 9 Jul 2021

Hongkongers probably earned the most returns in two years from their US$154 billion pension scheme in the first half of this year from a rally in global stocks. These winnings could be eroded by policy tightening in the US and a tech sector crackdown at home by China.

The Mandatory Provident Fund (MPF) generated HK$52.6 billion (US$6.8 billion) of investment income in the January to June period, according to calculations by the Post based on data provided by Refinitiv. That is equivalent to a 4.5 per cent gain, or about HK$11,690 per member. The scheme suffered a 2.7 per cent loss, or HK$7,752 each, in the same period last year when the Covid-19 pandemic struck.

The MPF oversees some HK$1.2 trillion of funds for about 4.5 million scheme contributors in the city, and offers more than 400 investment vehicles from asset management companies worldwide, including stocks, bonds and exchange-traded funds. The retirement nest-egg was seen as insufficient for retirement for nine out of 10 Hongkongers between the ages of 50 and 59, according to a recent survey.

The second half of this year will be challenging, as the US Federal Reserve has indicated a potential lift-off or increase in borrowing costs from late 2023, while encouraging debates about dialling back its bond purchases or policy stimulus. China has, however, separately signalled possible monetary easing to support a potentially faltering economic recovery.

A tech sell-off at home has knocked US$245 billion off the market value of such companies so far this month. Photo: Sam Tsang

Global stocks have wavered near all-time highs, while a sell-off in tech stocks at home has lopped at least US$245 billion off their market value this month amid tightened regulatory curbs in China. The broader Hong Kong market has lost HK$3.14 trillion in capitalisation.

“China’s regulatory reforms will add a lot of uncertainties in the market, which could lead to a correction in the Hong Kong and mainland China markets through the third quarter,” said Louis Tse Ming-kwong, managing director of Wealthy Securities.

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