Hong Kong’s Mandatory Provident Fund Poised for Best Year in Four
The Mandatory Provident Fund (MPF) is on track to report its strongest performance in four years, with an estimated gain of HK$102.8 billion (US$13.2 billion) as of December 18. This marks the third time the fund’s gain has exceeded HK$100 billion, according to MPF Ratings, an independent research firm.
US Stocks Lead the Charge
US stock funds have been the top performers this year, boasting a 21.5% gain, followed closely by Japan stock funds at 18.7%. China and Hong Kong stock funds rank third, with a 15.5% gain.
A Compulsory Retirement Scheme
Established in 2000, the MPF is a compulsory retirement scheme that covers 4.7 million current and former workers in Hong Kong.
Looking Ahead to 2025
Francis Chung, chairman of MPF Ratings, believes the incoming Trump administration will make for an interesting 2025. “Protectionism and deregulation appear to be Trump’s calling card, and while the rhetoric is proving popular for US equities, there may also be unintended consequences,” Chung said.
Diversification is Key
Philip Tso, head of APAC institutional business at Allianz Global Investors, advises MPF members to consider leaning more toward higher-risk assets in 2025. “As we enter 2025, following a decisive result in the US election, the outlook for risky assets seems positive, with a soft landing in sight for the US and world economies despite the potential for volatility ahead,” Tso said.
A Positive Outlook for US Equities
Tso believes Trump’s promises of lower corporate taxes and deregulation will bring more positivity to the market and benefit corporate margins. “If these measures lead to a period of calm in equity markets, investors may increase equity positions,” he said.
Interest Rates and Investment Strategies
As interest rates fall, MPF members who are holding cash or low-risk money market funds could move into assets with medium levels of risk, like fixed-income or stock funds. “In a lower interest rate environment, investors should adopt strategic approaches for their MPF investments to maximise returns,” Tso said.
China’s Economic Support
Outside the US, China recently unveiled a new US$1.4 trillion package to restructure local government debt, which Tso believes is a step in the right direction to support Chinese markets.
Mixed Expectations for 2025
While some experts, like AIA chief investment officer Mark Konyn, expect the outlook for the US and China to be positive, others, like Elvin Yu, CEO of Goji Consulting, are more cautious. “With the two largest economies in the world likely to spend big fiscal sums to boost their domestic economies, and given that the US economy is operating close to maximum capacity, it is easy to see inflationary pressures building up in the goods and services sector,” Yu said.
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