Hong Kong’s Mandatory Provident Fund (MPF) earned a combined HK$148.8 billion (US$19 billion) in the year’s first nine months, equivalent to HK$31,300 for each member, marking the best performance in seven years and the fourth best ever.
The 379 MPF investment funds generated an average return of 12.8 per cent in the year to September, on the back of the recent market rally driven by the interest rate cut and China’s stimulus package, according to MPF Ratings, an independent research firm.
Hong Kong and China equity funds – the most popular fund choice with about a quarter of all MPF assets – showed the best performance during the period at 23.6 per cent. In September alone, they ranked top with gains of 18 per cent, the second best monthly return on record.
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Hong Kong’s benchmark Hang Seng Index jumped 18 per cent in September, the best month since November 2022, while the Shanghai Composite Index jumped 17 per cent, the most since April 2015. The rally came after the US Federal Reserve lowered its key rate by 50 basis points on September 18 to kick off the rate-cut cycle, the first reduction in four years. It gathered steam after Beijing on September 24 unleashed bold stimulus measures to reverse the housing market slump and boost the economy.
“Hong Kong and China equities were the MPF’s biggest winners, as the mainland’s sweeping economic stimulus announcement transformed equity performance,” said Francis Chung, chairman of MPF Ratings.
“While markets face several headwinds, if they track favourably, the MPF system could achieve annual investment gains of more than HK$150 billion for the first time ever, which would be a great reward for the MPF’s 4.75 million members.”
The MPF total assets rose above the HK$1.3 trillion mark for the first time in September to HK$1.327 trillion. The sum, which takes into account investment gains and new contributions from members, works out to a record HK$279,100 per member.
Chung said the MPF’s average account balance was now worth more than a brand-new Tesla Model 3 or a Hermes Birkin handbag, which showed the “real value MPF has brought to its 4.75 million MPF members”.
US stock focused funds delivered the second-best returns, posting average growth of 19 per cent for the first nine months, but they ranked only 11th in September at 1.4 per cent.
They were followed by Japanese equity funds, which returned 18.8 per cent in the first nine months, but they ranked 22nd in September with a modest loss of 0.1 per cent.
Mixed-asset funds, another popular fund choice, which invest in equities and bonds, gained 16 per cent in the first nine months and 6.3 per cent in September.
Default investment strategy, which uses a diversified approach to investing in global stocks and bonds and reduces the risk level according to the members’ age, also performed well. Those with higher exposure to stocks reported 11 per cent gain in the first nine months, and those more focused on bonds recorded 5 per cent growth, MPF Ratings’ data showed.
Global bond funds gained 1.9 per cent in the first nine months and money market funds gained 2.72 per cent.
“The satisfactory performance of the MPF was mainly due to the easing monetary policies of different countries, including China and the US,” Kenrick Chung, director of Ben. Excellence Consultancy, a Hong Kong insurance broker, said, adding that the actual effect of Beijing’s stimulus measures will only be reflected in the next few months.
“As most of the developed economies take a policy-easing approach, it will benefit capital markets. If geopolitical risk, especially the Middle East, does not get worse, we believe that the growth trend can be maintained.”
Established in 2000, Hong Kong’s MPF gathers monthly contributions from employers and employees, which is invested into the member’s choice of 379 investment funds. Employees can cash in their investments at the age of 65.
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