Mandatory Provident Fund (MPF)

Hong Kong’s MPF up 5pc in first nine months, on track for best full year gain in three years

PUBLISHED : Monday, 03 October, 2016, 5:49pm
UPDATED : Monday, 03 October, 2016, 10:58pm

Hong Kong’s Mandatory Provident Fund saw gains for the fourth consecutive month in September, bringing total returns for the first nine months of the year to 5.02 per cent, and putting it on track for the best annual performance in three years, according to data from Thomson Reuters Lipper.

The returns were boosted by a better stock market performance in September, driven by the US decision not to increase interest rates, as well as expectations of the launch of the Shenzhen-Hong Kong Stock Connect in November, according to Elvin Yu, principal of pension consultant firm Goji Consulting.

The MPF funds tracked had an average return of 1.17 per cent in September, short of the 1.46 per cent in August and 2.95 per cent in July, but higher than the 0.13 per cent increase in June. The gains of the past four months have offset losses from earlier this year amid a volatile period in global share markets.

The MPF is now on track to have its best full year result in three years, after a decline of 2.95 per cent last year and a modest return of 1.55 per cent in 2014. However, it still has room to catch up to the 8 per cent gain in 2013.

Thomson Reuters Lipper tracks the monthly performance of 435 MPF investment funds.

“The stock markets in both Hong Kong and the mainland have bounced back in recent months after a very bad beginning this year. This has helped the overall MPF performance to recover in recent months. Looking ahead, we are likely to continue to see the MPF do well,” Yu said.

“Meanwhile, the Japanese stock market is also set benefit from the Bank of Japan’s initiatives to boost the economy. Fears of a US interest rate rise have also faded as we have passed nine months this year already and still have not seen any rate rise, ” he said.

Equity funds, which are the most popular fund choices in Hong Kong, did well for the first nine months this year.

Hong Kong equity funds were the best performers in September, posting a return of 3.27 per cent, followed by Greater China equity funds at 3.24 per cent, and Japan equity funds at 2.63 per cent, according to Thomson Reuters Lipper.

For the first nine months, the best overall performers were Asia Pacific (excluding Japan) equity funds with 12.28 per cent growth, followed by Greater China equity funds at 9.46 per cent. Hong Kong equity funds ranking fourth with 9 per cent return.

Mixed asset funds, which invest in both equities and bonds and which rank as the second most popular fund choice, had a return of 1.56 per cent in September and a return of 5.73 per cent for the first three quarters.

The weakest performance was from health care equity funds which lost 0.89 per cent in September.

About 40 per cent of the HK$600 billion under the MPF is invested in equity funds, while 37 per cent is in mixed-asset funds. The remainder of the money is allocated to bond funds, conservative funds, guarantee funds and money market funds, according to data from the Mandatory Provident Fund Schemes Authority, which oversees the scheme.