Investors in Hong Kong’s Mandatory Provident Fund (MPF) can continue to bet on Chinese stocks in the Year of the Ox despite some short-term volatility, top performing fund managers said.
The 401 investment funds of the compulsory retirement scheme cover about 4.5 million current and former employees in the city. On average, these funds grew 12.2 per cent last year and 12.65 per cent in 2019, according to data provider Refinitiv Lipper. The total asset value of the MPF rose to HK$1.1 trillion (US$140 billion) as of the end of last year, data released by Mandatory Provident Fund Schemes Authority on Monday shows.
“In the short term, we would not be surprised to see a period of consolidation in markets. In China in particular, as economic momentum accelerates it is likely we will see some modest tightening of monetary policy,” said Raymond Chan, chief investment officer of equity Asia-Pacific and portfolio manager at Allianz Global Investors.
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Chinese stocks will continue to be a safe bet in the new year, which starts on Friday, because the country’s economy has recovered from the economic dislocation caused by the coronavirus pandemic quicker than the rest of the world, fund managers said. China posted 2.3 per cent growth in gross domestic product in 2020 despite a steep slump in the first quarter due to the pandemic, becoming the only major economy to avoid a contraction last year.
“We remain optimistic about the longer term outlook. We expect to see a global economic recovery in the second half of the year, and this should lead to an improving growth outlook,” Chan added. AllianzGI had three MPF funds among the top 10 performers of 2020, according Refinitiv data. These invest in Asia-Pacific stocks, stocks in China, Taiwan and Hong Kong, and bond and stocks in Asia.
The Greater Bay Area will also drive growth for Chinese companies, Chan said. “We believe the longer term story for Greater China markets remains compelling. The experience has strengthened China’s credentials as an emerging world economic power through the last year,” he said. Chan favours companies that could outperform despite the pandemic, such as those in the internet, 5G infrastructure, renewable energy and biotechnology sectors.
Funds investing in China, Taiwan and Hong Kong were last year’s best performers, earning more than 31 per cent. Of the top 10 investment funds, seven were equity funds investing in China stocks.
JPMorgan Asset Management (Asia-Pacific) was the top fund manager last year, after BOCI-Prudential My Choice, which it manages, earned 51.75 per cent in returns.
“China has forged ahead in the global economic recovery, given its quicker rebound from Covid-19, and it has been an export beneficiary from stimulus elsewhere. For example, we have seen strong growth in solar installation and electric vehicle sales helped by European stimulus policies,” a fund spokesman said.
The Principal Smart Plan – Principal Dynamic Greater China Fund was last year’s third-best performer, with 46.94 per cent. “China’s GDP growth is expected to speed up to 8 per cent or above in 2021, which is generally higher than the projected 4 per cent to 5 per cent in Europe and America,” a spokesman said.
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