Mandatory Provident Fund (MPF)

Back in the black: MPF funds rebound in July with U-shaped recovery

Retirement scheme’s funds returned an average 2.9 per cent during July

PUBLISHED : Tuesday, 02 August, 2016, 12:22pm
UPDATED : Tuesday, 02 August, 2016, 11:06pm

The Mandatory Provident Fund, which covers 2.5 million employees in Hong Kong, rebounded in July with an average profit of 2.89 per cent for the month against a loss in the first half of this year.

All types of fund categories were in the black in July, which ranked as the best performing month since a 5.19 per cent return in March, according to data compiler Thomson Reuters Lipper.

July represented a turnaround from a loss-making first half when 435 investment funds under the pension scheme reported an average loss of 0.55 per cent after the global stock and currency market turmoil triggered by the Brexit factor. In the wake of Britain’s June 23 referendum to pull out of the European Union, global stock markets tumbled 8 to 10 per cent while sterling dropped to a 31-year low.

MPF needs a rethink given that many Hong Kong people will live much longer than previously expected

The U-shaped recovery was aided by bullish activity in US markets, where major indexes rose to records on better-than-expected corporate earnings. The quick appointment of a new British Prime Minister last month also helped to ease fears over Brexit, while monetary easing policies announced by the Bank of England, the European Central Bank and the Bank of Japan also helped to bolster markets.

Among the MPF funds, Greater China equity funds rose 5.02 per cent while Hong Kong equity funds were up 4.9 per cent in July. Asia Pacific equity funds rose 5.21 per cent and Japan equity funds up 5.38 per cent during the month.

Last year, the MPF reported a decline of 2.95 per cent, the worst annual performance for the pension fund since 2011, when it lost 8.57 per cent after the stock and bond markets were hit by the European debt crisis.

MPF loses 4.53 per cent of value in first half

The MPF has been a steady performer in recent years, having risen 1.55 per cent in 2014 after an 8 per cent gain in 2013 and a 12.18 per cent jump in 2012.

Mixed-asset funds, which invest in bonds and equities, returned 3.80 per cent in July.

About 41 per cent of the HK$560 billion under the MPF is invested in equity funds while 38 per cent are in mixed-asset funds and the remainder in bond funds, conservative funds, guarantee funds and money market funds, according to data from the Mandatory Provident Fund Schemes Authority.