Mandatory Provident Fund (MPF)

Hong Kong’s MPF pension scheme poised for best year since 2009

Funds in the retirement programme reported average gains of 15.35 per cent in the first nine months of this year, according to a report, putting them on track for the highest return in eight years

PUBLISHED : Wednesday, 11 October, 2017, 6:39pm
UPDATED : Wednesday, 11 October, 2017, 11:29pm

Hong Kong’s pension scheme, the Mandatory Provident Fund, is on track to report its best performance in eight years after returns of 15.35 per cent in the first nine months of this year, according to data from fund research company Thomson Reuters Lipper.

If the 481 funds in the MPF scheme can maintain the same level of returns in the remaining three months, the MPF scheme as a whole would have its best year since 2009, when it posted a return of 25.89 per cent.

That would be a sharp improvement on last year’s return of 1.26 per cent and the previous year’s loss of 3.1 per cent.

“The global stock markets have been doing well in the first nine months of this year, which has benefited the MPF,” said Ben Kwong Man-bun, a director at broker KGI Investment.

Kwong said the stock markets could continue to gain in the next three months in Asia and Europe, with economic data supporting the growth scenario, and that would help the MPF to report a strong year.

Lipper said Hong Kong equity funds were the best performers in the first nine months, with an average return of 29.19 per cent, beating the city’s Hang Seng stock index, which rose 25 per cent in the same period to be the best performing market worldwide.

The second-best performers were Greater China equity funds, which reported average returns of 28.94 per cent, while Asia excluding Japan funds ranked third with a 26.97 per cent gain, Lipper said.

No funds reported losses during the nine months, while the worst performers were money market funds which invest only in bank deposits.

Hong Kong dollar market funds reported a gain of 0.73 per cent and US dollar market funds had returns of 1.08 per cent for the period.

Mixed asset funds – the most popular fund choices among MPF members and which invest in both stocks and bonds, reported average returns of 13.37 per cent during the nine-month period, Lipper said.

In September alone, however, the MPF had only a modest growth of 0.22 per cent. Equity in Europe ranked as the best performer during September, with a return of 3.21 per cent, while the worst performers were Korean equity funds, with a loss of 2.87 per cent.

Kenrick Chung Kin-keung, director of MPF business development at Convoy Financial Services, noted some risk factors ahead for the MPF.

“The US, Japan and Europe have started to wind down monetary easing policies. The US and North Korean relationship remains tense,” he said. China’s five-yearly congress of its ruling Communist Party next week may announce some new policies that could affect market sentiment, he said.

“Overall, market sentiment remains positive, but investors should beware that the rally could turn around anytime soon,” he said. “I would recommend MPF members continue to invest in Asian and European equity funds.”

Louis Tse Ming-kwong, VC Asset Management’s managing director, said investors could take profits from this year’s market rally at any time.

“I am cautiously optimistic but there are risks for the market to go lower in the next few months if there is any negative news,” Tse said.