Mandatory Provident Fund (MPF)

MPF rebound in November fails to offset losses in the first 11 months of the year

  • All 426 MPF investment funds report a 1.77 per cent gain in November but lost 5.87 per cent year to date
  • Analysts predict full-year loss as uncertainties hang over US-China trade
PUBLISHED : Thursday, 06 December, 2018, 11:51am
UPDATED : Thursday, 06 December, 2018, 11:51am

A strong Hong Kong stock market rebound in November has helped each member of the Mandatory Provident Fund earn HK$5,106 (US$653), but not enough to rescue the government’s mandated pension fund from suffering a loss in 2018.

On average, each member – or employee – still lost HK$14,139 in the first 11 months this year, according to data from financial services firm Convoy Financial.

The benchmark Hang Seng Index bounced back by 6.1 per cent in November from a 13 per cent drop over the first 10 months of the year, which also helped the MPF pared losses.

The fund covers 2.8 million employee and self-employed people in Hong Kong. Employers match five per cent of the salaries that employees must contribute to the fund, up to a combined HK$3,000 per month which would then be invested into a number of investment funds.

The pension scheme has assets totalling HK$858.314 billion at the end of September, according to data from the Mandatory Provident Fund Schemes Authority.

In November, the compulsory fund, comprising 426 MPF investment funds, reported a 1.77 per cent gain, data from Refinitiv, formerly Thomson Reuters Lipper that tracks the fund’s performance showed. This compared with the 5.87 per cent decline in the first 11 months.

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Analysts expected the MPF to post its worst performance since 2011, with an 8.4 per cent loss for the year.

“As the negotiation result of the US-China trade war is still unknown, worldwide stock market uncertainties and doubts over the economic outlook of the US remain. As such, there is still a chance that the fund will end up being in the red,” said Kenrick Chung, chief commercial officer of Charter Management Group.

With an estimated 38 per cent of MPF assets invested in Hong Kong equities, Chung said the performance of the city’s stock market was a key factor.

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“It seems obvious that 2018 would be a loss year for most of the MPF fund categories,” said Elvin Yu, a principal at pension advisers Goji Consulting.

He said equity and mixed-asset funds – two most popular categories accounting for 78 per cent of MPF assets – lost more than 10 per cent and between 5 to 10 per cent respectively.

Regionally, South Korea equity funds were the biggest loser, dropping 21 per cent in the first 11 months, according to Refinitiv. Asia-Pacific stock funds followed with a 14.3 per cent decline and Asia-Pacific excluding Japan equity funds ranked third, falling 13.4 per cent.

Health care stock funds and US equity funds gained 6 per cent and 1.5 per cent respectively in the 11-month period.