The 4.75 million members of Hong Kong's Mandatory Provident Fund (MPF) received an average of HK$7,300 (US$936) in the initial three months of this year, with the pension fund benefiting from improved conditions. a stock-market rally .
On Thursday, the MPF announced aHK$34.8 billion investment return for the first quarter, as per data provided by MPF Ratings, an independent research company.
The 379 individual funds under the MPF achieved an average return of 2.7 percent in the initial quarter, marking the highest performance since a 4.1 percent increase in the first quarter of 2023. As for the year 2024, the MPF reported a return of 8.8 percent.
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The outcome increased the MPF's overall assets to HK$1.338 trillion by the end of March. This figure includes both investment returns and fresh contributions made by members, amounting to HK$279,100 for each individual. Compared to the previous year, this represents a growth of 13%, reflecting an average rise of HK$30,000 per member’s portfolio.
"Significantly, Hong Kong and Chinese equities outperformed all other asset categories in the first quarter, whereas US equities declined," stated Francis Chung, who serves as the chairman of MPF Ratings.
This performance discrepancy should be a stern reminder for the unprecedented number of MPF members who shifted from Hong Kong and China stocks to U.S. equities over the past year.
In the first quarter, Hong Kong and China equity funds led with returns of 12 percent, trailed by European equity funds which saw gains of 6.3 percent. Other equity funds completed the top trio with a return of 4.4 percent, according to data provided by MPF Ratings.
US equity funds had the poorest performance, declining by 5.3 percent, whereas global equity funds dropped by 1.8 percent.
The favorable outcome of the MPF was supported by a market upturn that ensued. artificial-intelligence start-up DeepSeek's launch of two potent yet budget-friendly extensive language models in January.
Approximately one-third of the MPF's equity assets are allocated to the Hong Kong stock market, according to Kenrick Chung, who serves as the Chief Corporate Solutions Officer at Bay Insurance Brokers.
"In addition, the growing array of economic stimulus measures implemented by the Chinese government provides momentum for expansion," he stated.
The Hang Seng Index has risen by 15 percent this year following an increase of 18 percent in 2024, whereas the Hang Seng Tech Index has seen a gain of 21 percent year-to-date.
In contrast, the S&P 500 dropped 4.6 percent during the initial three months of the year, marking its poorest performance at the beginning of a year since the opening quarter of 2022. Experts pointed to concerns over inflation and an impending U.S. recession as reasons for this decline.
Launched in 2000, Hong Kong’s Mandatory Provident Fund (MPF) is a required savings program where both employers and employees contribute monthly amounts. These contributions can make up to 5 percent of the employee's monthly income towards their retirement fund.
The required contribution has an upper limit of HK$3,000 per month—HK$1,500 contributed by each the employee and their employer. These contributions go into investment options selected by the members themselves. The money can be withdrawn once the individual reaches 65 years of age.
According to the data from MPF Ratings, mixed-asset funds, which include investments in both stocks and bonds, saw an increase of 3.6 percent during the initial three months of the year.
A standard investment strategy (SIS) that adopts a varied approach to investing globally in both equities and fixed-income securities adjusts the level of risk based on an individual’s age. This particular method showed inconsistent outcomes; SIS choices with greater emphasis on stocks experienced a decline of 0.4 percent during the initial three months, whereas those leaning towards bond investments saw a rise of 0.5 percent.
Moving forward, Chung from Bay Insurance advised the members to remain cautious about potential market fluctuations for the rest of 2025.
While the newly formed U.S. administration is posing a threat to the global economy through proposed increases in tariffs, other nations stand ready to counter these moves," he stated. "Such tariff hikes could trigger inflation within the United States, which would consequently impact both the interest rates set by the U.S. Federal Reserve and various economic activities within the country. Members of the MPF should brace themselves for potential volatility in financial markets.
Members of the Mandatory Provident Fund (MPF) who are comfortable with taking on greater risks might want to allocate some of their savings into Hong Kong and Chinese equity funds. The reasoning behind this advice is that the mainland authorities possess numerous strategies for stimulating economic activity, an effort that will likely have positive ripple effects on Hong Kong’s economy as well, he explained.
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The article initially appeared on the South China Morning Post (www.scmp.com), which is the premier source for news coverage of China and Asia.
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