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Wednesday, June 29, 2016, 17:39

Analysts urge caution as MPF returns dip into red

By Oswald Chan in Hong Kong

The Mandatory Provident Fund (MPF) posted an average net loss of 2.23 percent from January to June 24, according to independent investment research firm Morningstar.

That came as  analysts advised MPF members to diversify their portfolios and stay disciplined, as market volatility will likely continue through the second half of this year.

In the funds category, Japanese equity funds posted a net loss of 12.47 percent, followed by European equity funds (-9.3 percent), Hong Kong equity funds (-7.18 percent) and Greater China equity funds (-7.17 percent).

Global bond funds fared better, registering a net return of 4.71 percent, while Asian bond funds also rose 4.33 percent.

“Uncertainties surrounding the US interest rate hike path, the post-Brexit impact, the US presidential election, the collapse in commodity prices, mainland regulatory misadventures and global acts of terrorism will continue to drive volatility in global investment markets," said Terrence Kan Lap-hang, an investment director at MPF service provider Fidelity International.

“The response of global central banks to market volatility, including accommodative monetary policies, will provide support to the Asian and mainland markets,” Kan said at a press conference on Wednesday.

Meanwhile, local MPF advisory firm Gain Miles MPF Consultants (Gain Miles) expects MPF investment to yield a net return of 4 to 5 percent this year.

“The US interest rate hike pace may only be gradual, coupled with moderate mainland economic growth and the possible commencement of Shenzhen-Hong Kong Stock Connect. All these factors will boost market sentiment and the Hang Seng Index  may gain 10 percent by the end of this year,” Gain Miles’ Managing Director Michael Chan Yui-lung said in Hong Kong last week.

“The low valuation of the Hong Kong stock market is another positive factor. Currently the HSI is trading at 10 times price-to-earnings ratio,” Chan added.

Both Chan and Fidelity International’s Kan advised MPF members to be aware of their risk appetites and make asset allocations based on their risk tolerance levels.
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