The Mandatory Provident Fund is on track to report its best performance in four years in 2024, while most analysts believe next year’s performance will remain on a positive trajectory.
As of December 18, the MPF’s 379 mutual funds had an estimated profit of HK$102.8 billion (US$13.2 billion) for the year, the third time the fund’s profit has exceeded HK$100 billion, according to MPF Ratings, a independent research agency.
US stock funds have been the best performers so far this year, with a gain of 21.5 percent, while Japanese stock funds came in second with 18.7 percent. Chinese and Hong Kong equity funds rank third with 15.5 percent.
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Established in 2000, MPF is a mandatory pension scheme covering 4.7 million current and former employees.
An illustration of the MPF in Hong Kong, on March 29, 2018. Photo: Martin Chan alt=An illustration of the MPF in Hong Kong, on March 29, 2018. Photo: Martin Chan>
Looking ahead, Francis Chung, chairman of MPF Ratings, said the new Trump administration should deliver an interesting 2025.
“Protectionism and deregulation appear to be Trump’s calling card, and while the rhetoric is proving popular for US stocks, there could also be unintended consequences,” Chung said. “MPF members may be tempted to have a US bias in their portfolio, but diversification is important.”
Philip Tso, head of APAC institutional affairs at Allianz Global Investors, said MPF members may consider shifting towards higher-risk assets in 2025.
“As we enter 2025, following a decisive US election outcome, the outlook for risk assets appears positive, with a soft landing in sight for the US and global economies, despite the potential volatility ahead,” Tso said.
Tso said Trump’s promises of lower corporate taxes and deregulation should bring more positivity to the market and help corporate margins.
People posed in front of a Christmas tree outside the New York Stock Exchange. Photo: Agence France-Presse alt=People posed in front of a Christmas tree outside the New York Stock Exchange. Photo: Agence France-Presse>
“If these measures lead to a period of calm in the stock markets, investors may increase their equity positions,” he said. “We view this environment as particularly favorable for US equities.”
Tso said that if interest rates fall, MPF members holding cash or low-risk money market funds can switch to medium-risk assets such as fixed income or equity funds.
“In a lower interest rate environment, investors should take strategic approaches to their MPF investments to maximize returns,” Tso said. “Focusing on equity funds, especially those in growth sectors like technology and healthcare, can deliver better returns than traditional fixed income options.”
People stand near an electronic stock board showing Japan’s Nikkei index at a securities firm on December 23, 2024 in Tokyo. Photo: AP alt=People stand near an electronic stock board showing Japan’s Nikkei index at a securities firm on December 23, 2024 in Tokyo. Photo: AP>
Outside the US, China recently unveiled a new $1.4 trillion package to restructure local government debt. According to Tso, this is a step in the right direction to support the Chinese markets.
AIA chief investment officer Mark Konyn also expects the outlook for the US and China to be positive.
“US economic growth, lower bond yields and a favorable outlook for risky assets provide a positive backdrop for 2025,” Konyn said. “The growing expectation of economic support in China, if realized, would further support local market sentiment.”
“Investors are closely monitoring any policy initiatives following the presidential inauguration, especially on trade policy.”
Trump’s policies are likely to have a positive impact on U.S. stocks and a muted impact on Chinese markets, said Kenny Ng Lai-yin, strategist at Everbright Securities International.
“Trump will implement tax cut policies and pursue trade protectionism, which will support the US stock market,” Ng said. “On the other hand, market concerns about Trump’s imposition of tariffs on China could have a dampening effect on the Chinese and Hong Kong stock markets.”
Overall, Ng believes the MPF will continue to perform well in 2025 thanks to strong momentum in the world’s major equity markets.
Elvin Yu, CEO of Goji Consulting, is not so optimistic.
“With the world’s two largest economies, the US and China, likely to spend large fiscal sums to stimulate their domestic economies, and given that the US economy is operating close to maximum capacity, it is easy to see that inflationary pressures builds up in the future. the goods and services sector,” Yu said.
Yu urged MPF members to adopt flexible asset allocation in 2025 instead of overweighting equities.
“We will see quite severe corrections driven by a possible reversal of the US Fed’s accommodative monetary policy as higher inflation looms again,” Yu said. “Cash was trash in 2023 and 2024. But it could be a more useful asset to own in 2025.”
