Mandatory Provident Fund posts best returns in three months, scoring each Hongkonger HK$11,136 in July

Hong Kong’s Mandatory Provident Fund bounced back in July, with earnings of HK$33.4 billion (US$4.3 billion) on the back of robust stock market gains, and in the process wiped out the losses made in the first half.
The returns fetched about HK$11,136 for each of the nearly three million people covered by the city’s compulsory retirement scheme, based on Refinitiv Lipper data.
The 414 MPF investment funds with total assets of HK$867 billion gained an average of 3.85 per cent in July, the best performance since the 4.6 per cent increase in April. The MPF fund’s losses stood at 2.68 per cent in the first six months.
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“The performance of the MPF in July was mainly driven by the strong performance of the stock markets, especially in Hong Kong and the mainland,” said Kenny Ng Lai-yin, a securities strategist at Everbright Sun Hung Kai.
Equity funds were the biggest winners, with those investing in the Asia-Pacific excluding Japan, ranking at the top with average monthly returns of 8.8 per cent, followed by Greater China equity funds at 8.7 per cent and US equity funds at 5.7 per cent, Refinitive Lipper data showed.
This was in line with market performance, with the Shanghai Composite Index surging 10.9 per cent, its biggest monthly jump in 17 months while the Shenzhen benchmark jumped 13.7 per cent. South Korea’s Kospi benchmark also performed strongly, rising 6.7 per cent, its best in three months.
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The mainland stock markets surged with the accelerated pace of economic recovery, which exceeded market expectations, Ng said. China’s gross domestic product grew by a better-than-expected 3.2 per cent in the second quarter, becoming the first major economy to report positive growth amid the Covid-19 pandemic.
Hong Kong equity funds, comprising 38 funds that are popular with investors, had average returns of 4.3 per cent, while mixed-asset funds, which invest in both stocks and bonds, made an average of 4 per cent. Their performance handily beat the benchmark Hang Seng Index, which edged up 0.7 per cent during the month. The new Hang Seng Tech Index, launched on July 27 and tracking the 30 biggest tech stocks, added 12.2 per cent.
For the rest of the year, Everbright’s Ng holds a positive view on the mainland and Hong Kong stock markets. He said that the valuation of shares on both markets remains low and have room to rise further, which will benefit the MPF’s performance.
Over 70 per cent of MPF assets are invested in stocks and the rest in bonds and cash.
Japanese equity funds were the worst performers last month and the only category of funds to suffer a loss. Their returns of minus 1.2 per cent was however better than Tokyo benchmark’s 2.6 per cent decline in July.
“The markets had priced in poor data earlier on, which actually turned out to be not as bad as expected,” said Elvin Yu, chief executive of Goji Consulting, a pension consultancy. “Hence, it provided certain comfort and a decent rebound in July.”
The outlook for the second half revolves around how Covid-19 pans out and signs of solid development in the race to find a vaccine for the deadly disease, Yu said.
“At present, it seems market sentiment is relatively optimistic with regards to the pace of economic recovery. There is a fair chance the MPF’s performance will continue to recover for the rest of the year,” he said.
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