New rule allows MPF fund managers to invest in Shanghai, Shenzhen shares, enabling 4.5 million savers to tap mainland China’s booming stock market

Before the rule change, only about 1.1 per cent of the Hong Kong pension fund’s HK$1 trillion of assets was invested in Chinese companies’ domestically-listed stock

The Shanghai Composite Index has gained 9 per cent this year and the Shenzhen Component Index has surged by a third, versus a 6 per cent fall in the Hang Seng Index

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The Shenzhen stock market has boomed this year as China’s economy has rebounded from Covid-19 ahead of global rivals. Photo: Sam Tsang

Published: 5:15pm, 17 Nov 2020Updated: 9:43pm, 17 Nov 2020

The Mandatory Provident Fund (MPF) will be able to offer a greater range of investment options after a government rule change that allows fund managers to plough more of the HK$1 trillion (US$129 billion) pot into the shares of companies listed in mainland China.

The rule change, announced on Friday and effective immediately, has added the Shanghai and Shenzhen stock markets to a list of approved exchanges for the MPF to invest in. It means the scheme’s fund managers can invest a greater portion of their assets in the two mainland bourses, just as they can the other 42 overseas exchanges, including the New York Stock Exchange, the London Stock Exchange and bourses in South Korea, Ireland, and Mexico.

Before the rule change, only about 1.1 per cent of the MPF’s total assets, worth HK$11 billion, have been invested in A shares – domestically listed shares of mainland Chinese companies, traded in yuan.

The move will pave the way for the 4.46 million Hong Kong MPF members to tap the growing opportunities in mainland China’s booming stock market. Shanghai and Shenzhen are among the best-performing markets worldwide this year as China’s economy bounced back from Covid-19 more effectively than overseas markets and Hong Kong.

MPF covers 4.46 million current and retired workers in Hong Kong for their pension protection. Photo: Winson Wong

The Shanghai Composite Index has climbed 9 per cent while the Shenzhen Component Index surged by a third this year. Meanwhile, the Hang Seng Index fell 6 per cent.

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