Mandatory Provident Fund (MPF) members are expected to earn HK$33,000 ($4,249) each on average as of Monday — three times as much as the whole of 2023 — as global markets rebounded on big policy moves, according to MPF consultant GUM.
GUM on Monday estimated an average investment return of some 12 percent logged in the compulsory pension fund program so far in 2024. Almost one-third of the year-to-date gain came from trading euphoria in Chinese equities as data showed that the average return as of Sept 24 was HK$23,006.
Hong Kong and Chinese mainland stocks have been on a tear as Beijing last week unveiled a broader-than-expected package of stimulus measures to reboot the world’s second-largest economy’s growth engine and fix its beleaguered real estate market.
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The nation’s policy blitz includes a reduction in the reserve requirement ratio and existing mortgage rates as well as 500 billion yuan of liquidity support for stocks, among other measures.
Benchmark Hang Seng Index (HSI) surged nearly 16 percent since Sept 23, closing at a new year-to-date high of 21,133.68 points on Monday; the Shanghai Composite Index reclaimed the key level of 3,000 points.
Elsewhere, the US Federal Reserve kicked off its long-awaited monetary easing cycle by opting for a 50-basis-point rate cut in September, providing another catalyst for the rally globally.
Looking ahead, Michael Chan, managing director at GUM, said he is sanguine about the Chinese equity market given the policy stimulus, signaling a chance for the HSI to reach 23,500 points by the end of the year. The potential rise would bring the MPF’s annual return to 16 percent, leading to an average earnings of approximately HK$45,000 per member.
Chan suggested a 50 percent allocation in the Chinese mainland and Hong Kong stocks, alongside 30 percent and 20 percent in US and Europen stocks respectively for the MPF portfolio to manage geopolitical risks through diversification.
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His remarks came at a time when China’s market has been undervalued for years. Before the recent inflow of hot money, global hedge funds’ allocation to Chinese stocks was less than 7 percent, the lowest level in five years, according to Goldman Sachs. Additionally, as of the end of August, the allocation of active funds to Chinese stocks worldwide was only 5.1 percent. That compared with 15 percent in August 2020.
