MPF’s top funds pivot to Asian equities from US stocks

HSBC, BEA and other top performers have been investing in Asian technology stocks and consumers

PUBLISHED : Sunday, 19 February, 2017, 4:02pm
UPDATED : Sunday, 19 February, 2017, 11:25pm

January was a good month for Asia’s equity markets, with indexes in Hong Kong and Taiwan outperforming US benchmarks.

Hong Kong’s key Hang Seng Index rose 4.3 per cent in January, and the China Enterprises Index of H shares rose 3.9 per cent while Taiwan’s index returned 2.1 per cent. During the same period, the Dow Jones Industrial Average advanced barely 0.8 per cent, while the broader S&P 500 Index rose 1.8 per cent.

That’s drawn the best-performing funds on Hong Kong’s Mandatory Provident Fund to shift from US equities into Asian stocks, especially technology companies and undervalued consumer-product companies, fund managers said.

Seven of the top 10 MPF funds of January invested in Asian equities, out of 435 funds tracked by Thomson Reuters Lipper. Asian funds, of which there are 27, delivered 6.4 per cent on average during the month, making the region the best performing for January.

This was a departure from last year, when almost every one of the top 10 performers were in US stocks. In January, US equity funds delivered 2.6 per cent, below the average.

“We are overweight in technology stocks, as we continue to be positive on the global technology cycle,” said HSBC’s head of Asian and Indian equities Sanjiv Duggal, whose HSBC and Hang Seng MPF-SuperTrust plus Asia Pacific equity funds delivered returns of 7.1 per cent. “We also like consumer plays in Asia, with a preference for market leaders with strong brands.”

He increased his funds’ investments in construction, energy, consumer brands, counting technology as the largest contributor.

“Our technology picks were the biggest contributors to performance in January,” Duggal said in an interview with the South China Morning Post. “From a country perspective, portfolio stocks in South Korea, Taiwan and India added the most value.”

BEA Union Investment Management’s Asia Equity Fund and Greater China Fund were also among January’s top 10 performers, both earning more than 7 per cent in returns.

“We have increased our investment in materials, energy and banking stocks in the Asian equities and Greater China Funds,” said BEA Union Investment Management’s chief executive Eleanor Wan. “These stocks were not doing well in 2016 and we believe they will perform better in 2017 due to their valuation.”

It’s still to early to predict Asian stocks outperforming US equities this year, Wan said.

“It’s too early to say as the US stock market remains on the rising trend,” she said. “Many of the policies of US President Donald Trump will help expand the economy and benefit the business sector. I believe the US market is still looking positive while Asia markets also have more room to go.”

“Overall, I would say this year would see stock markets worldwide outperformed the bond markets. However, MPF employees should not rush to shift their portfolio as they should invest their MPF contribution for their retirement need and should consider the risks factor and their age and lifestyle to make the investment decision,” she said.