The stock market rally has given a boost to the pension funds of Hong Kong's long-suffering workers, with Mandatory Provident Fund (MPF) investments having their best first-half performance on record.Employee pension investments had an average return of 10.38 per cent in the first six months of the year, the biggest first-half yearly increase since the MPF was introduced in 2000. For the second quarter, the 300 MPF funds recorded growth of 15.57 per cent, also the best performance since the MPF began.
Despite the solid performance, pension providers warned that employees should not rush to increase their allocation to the stock market as things are likely to be more volatile in the year ahead.
Rex Auyeung, Asia chief executive of MPF provider Principal International, said the first six months of this year was a reversal of the dire situation in the second half of last year.
"The year-to-date performance has been respectable but it is not indicative of the remaining half-year," Mr Auyeung said.
"There are still factors like unemployment that could dampen the recovery. The other unknown is the impact of the different government stimulus programmes as it will take a few more months for the real impact to surface."
MPF funds rose 7.83 per cent on average in May. Equity funds, the worst performers last year and in the first two months, had the strongest performance among all types of MPF investments, with a gain of 18.13 per cent in the first half, according to Thomson Reuter Lipper. They registered a loss of 5.79 per cent in the first quarter and 39.57 per cent for last year.
Hong Kong equity funds averaged a return of 32.35 per cent, against a 27.7 per cent rise in the Hang Seng Index in the first half.
Balanced funds, which invest in a combination of stocks and bonds and are the most popular MPF investment fund choice, had an average return of 8.83 per cent. Bond investments lost 0.81 per cent.
Sally Wong, the chief executive of the Hong Kong Investment Funds Association, said the outlook remained uncertain.
"There are still uncertainties in the investment market in the second half of this year," Ms Wong said. "MPF employees should not switch their fund choices based on the short-term strong performance of the investment markets. They should invest for the long term."
The article: Stock rally propels MPF returns to a record
Natalie Chiu and Enoch Yiu
SCMP, Hong Kong 21st July 2009