Government Lifts Cap On A-shares For Pension Fund

Hong Kong people will be able to invest more of their retirement funds in mainland stocks in future.

The government gazetted on Friday to include the Shanghai and Shenzhen stock exchanges into a list of bourses outside the SAR that are approved by the MPF Schemes Authority.

The move essentially lifts a cap on the weighting of A shares in offerings under the Mandatory Provident Fund scheme.

Currently, the amount invested in securities and permissible investments issued by any one person is limited to 10 percent of an MPF fund.

The Secretary for Financial Services and the Treasury, Christopher Hui, said "the time is ripe” for the change.

He added that the government had heeded the industry’s calls to invest more on the mainland, given the increasing internationalisation of A-shares.

A professor from Chinese University’s Department of Economics, Terence Chong, said he believes the move can generate higher returns to investors, highlighting that other overseas exchanges have also been added.

Aside from the mainland exchanges, the Indonesia Stock Exchange and Warsaw Stock Exchange are also recognised by the MPF Schemes Authority.

"The more country that you have in the pool, the better it will be the return because you have more options," Chong explained.

"The purpose of this extension is to allow the fund to make more investment outside of Hong Kong so that it can diversify the risks and increase the return."

Chong played down concern about the quality of investments added to the MPF funds.

"In China, I think the governance is improving over time and also for some emerging markets I think the governance should be okay, otherwise they would not choose those countries to be included," he said.

He expects more pension funds to look north, given the growth of the world’s second-largest economy.