Mandatory Provident Fund (MPF)

How Haitong Int’l gained an edge over rival MPF fund managers

Two of the firm’s fund managers share insights into how they achieved a 50 per cent return in 2017, well ahead of the average 21 per cent

PUBLISHED : Friday, 12 January, 2018, 3:36pm
UPDATED : Friday, 12 January, 2018, 8:45pm

Haitong International Asset Management has emerged as the champion fund manager for Mandatory Provident Fund returns in 2017.

The Haitong Hong Kong SAR Fund reported a return of 50 per cent for the year, compared with the 40 per cent average achieved by just equity funds and the 21 per cent among all 481 MPF funds tracked by Thomson Reuters Lipper.

So, what gave Haitong the edge?

Manage your own MPF portfolio or miss out on the Hong Kong stock market bull run, say advisers

“Many western fund managers adopt a defensive approach whereby they invest in utility stocks or high yield stocks that pay high dividends. But we adopt a growth approach where we invest in blue chips which have high growth potential and a good valuation,” said Zhang Wenxian, managing director of investment, Haitong International.

Yang Jianxin, chief investment officer and managing director, said the first step is to choose 100 Hong Kong stocks which meet five conditions – good valuation, growth prospects, a strong corporate business model, a positive rating by main stream analysts and a stable share price.

I believe the bull run has not yet ended and will go further in 2018
Zhang Wenxian, Haitong International Asset Management

Of that 100, they then select about 30 Hong Kong blue chips which are market leaders in the sector, have a strong track record for profits and good management, Yang said.

This has resulted in investments in big Chinese players like Tencent, Ping An Insurance Group, Country Garden and AIA, which were all high fliers in 2017, beating the Hang Seng Index which rose 36 per cent.

Zhang said another reason they outperformed other MPF fund managers was that he was optimistic about Chinese stocks last year.

Opinion: Hong Kong’s MPFA: responsible regulator or shying away from making fundamental reforms?

“At the beginning of 2017 many western investment houses worried about the Chinese economic slowdown and the weakening of the yuan against the US dollar. I, however, believed the Chinese economy was not bad and that many Chinese companies were trading at a very low valuation despite having entered into a high-growth cycle. We increased our investment in these stocks and the results showed that our prediction was right,” Zhang said.

He said the fund could do even better if the MPF did not have a restriction banning funds from investing more than 10 per cent of assets in a single stock. “This restriction prevented us from investing more in Tencent as we reached the limit a long time ago,” he said.

Both Yang and Zhang are reaping the rewards of their successful formula – they are also investors in the their fund.

“I believe the bull run has not yet ended and will go further in 2018. The Hong Kong stock market remains cheaper than many overseas markets. I believe the TMT, finance, consumer and health care sectors still look good,” Zhang said.