appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Enoch Yiu

Hong Kong’s pension regulator is considering changing rules to allow members of the Mandatory Provident Fund scheme to invest in sovereign bonds, according to a senior executive.
Plans are afoot to include sovereign bonds issued by the Chinese government and those of other countries, but the rule changes will explicitly exclude debt issued by city-level municipal governments.
Currently, the MPF’s 4.5 million members cannot invest in sovereign bonds as the rules require the bonds to be rated. While these bonds are not usually rated, it is the countries that are rated at the sovereign level.
“We are now reviewing our investment rules and are considering making a change to allow MPF funds to invest in Chinese and other countries’ sovereign bonds,” said Joseph Lee, director of product regulation at the Mandatory Provident Fund Schemes Authority (MPFA).

One of the possible solutions the MPFA was looking at was to use the sovereign credit rating instead of the bond ratings. If the proposed rule change is implemented after the review, sovereign bonds would qualify for investment by MPF funds as long as a country’s sovereign rating meets the MPFA’s investment grade requirement, Lee said.
The regulator’s proposed rule change was aimed at meeting demand of fund managers, who have been urging it to relax restrictions that would allow them to invest in Chinese bonds, commodities and other high-yield products to enhance returns for MPF members.
While the MPFA has carried out many reforms since the MPF’s introduction 20 years ago, their speed leaves a lot to be desired, critics said. One of the issues addressed by the regulator is the high management fees charged to members, but others such as low investment returns and insufficient protection for members have yet to be addressed.
“We want investors to have more investment choices, but we also do not want to expose them to high risks,” said Cheng Yan-chee, the MPFA’s acting managing director.
He said that the proposed rule change would only cover sovereign bonds but not those issued by city-level governments, as regional or municipal governments have a higher risk of defaulting.
Hong Kong’s MPF lost each member US$1,387 in third quarter
China’s 10-year sovereign bond yields have climbed recently, hovering in the 3 per cent range, and are almost twice the 1.5 per cent yield of US Treasury. Bank deposits in Hong Kong, on the other hand, offer next to nothing.
If the rules are changed to allow fund managers to invest in sovereign bonds, it would be another breakthrough for the MPF. After years of lobbying by MPF fund managers, the MPFA last November relaxed rules, allowing them to invest in onshore shares of Chinese companies.
The proposed changes also come at a time when Beijing is introducing policies to boost Hong Kong’s bond market.


China’s Ministry of Finance on Wednesday will issue 5 billion yuan (US$780 million) of sovereign bonds in the city. It is the second of three tranches totalling 20 billion yuan to be issued in Hong Kong this year. The first batch of 8 billion yuan proved popular with investors.
The MPF funds will be able to invest in such bonds after the rule change takes effect.
The MPFA’s proposal to relax the rule is a move in the right direction, said Louis Tse Ming-kwong, managing director of Wealthy Securities.
“China’s sovereign bonds have low risks and can offer higher returns to MPF providers,” Tse said.


Led by China and US borrowing, the world now owes a record US$365 trillion debt: IIF

Bad money decisions are coming home to roost for the US and Japan

Hong Kong sets yuan trading timeline, backing Beijing’s push to boost currency’s use

Hong Kong unveils gold, bond and liquidity plans to drive next phase of yuan adoption

Banking & finance

MPF: Hong Kong’s pension regulator mulls allowing members to invest in sovereign bonds

People cross the road in Central, Hong Kong. Photo: Jonathan Wong

The view of Hong Kong's skyline with commercial and residential buildings is seen at Victoria Peak in Hong Kong. 17JUL20 SCMP / Sun Yeung

Hong Kong’s Mandatory Pension Fund scheme covers 4.5 million employees in the city. Photo: Bloomberg

Hong Kong’s Exchange Fund reports US$1.7 billion third-quarter loss as Beijing’s big tech crackdown batters stock market

The loss in the July-to-September period compares with a gain of HK$81.2 billion a year earlier. Photo: Shutterstock

Eddie Yue Wai-man, chief executive of the HKMA, said the Exchange Fund has a diversified portfolio. Photo: Winson Wong

Global investors hungry for Shenzhen’s US$775 million dim sum bond, the first mainland Chinese local government debt issued in Hong Kong

Carrie Lam Cheng Yuet-ngor (R), Chief Executive of Hong Kong, and Laura Cha Shih May-lung, chairwoman of the HKEX, strike the gong marking the launch of the bond on Tuesday. Photo: HKEX

China’s US$1.24 billion sovereign bond draws strong demand in Hong Kong on eve of southbound Bond Connect launch

The offering on Thursday attracted 24.56 billion yuan in total orders from investors worldwide. Photo: Bloomberg

The Hong Kong Monetary Authority has appointed 13 banks including HSBC, Standard Chartered and Bank of China (Hong Kong) as market makers. Photo: Nora Tam

Hong Kong’s pension fund chief promises to initiate reforms as MPF managers urge further easing of investment rules

Members of Hong Kong’s Mandatory Provident Fund scheme on average had assets of about HK$251,000 in their MPF accounts as of December 2020. Photo: Sun Yeung

Ayesha Macpherson Lau, chairwoman of Mandatory Provident Fund Schemes Authority, met the media for the first time on May 28, 2021 since she took the new role in March.  Photo taken on May 28, 2021 at MPFA office in Central. Photo: Handout

Pedestrians wearing protective mask walk at footbridge in Central. 29MAY20 SCMP / Sun Yeung

Business

Banking & Finance

Money

News

Hong Kong


Hong Kong’s pension regulator is considering changing investment rules that could allow the 4.5 million MPF members to invest in sovereign bonds
The regulator last November allowed MPF fund managers to invest in onshore stocks of Chinese companies



Hong Kong’s pension regulator is considering changing its investment rules that could allow the 4.5 million MPF members to invest in sovereign bonds.
