Expand Hong Kong’s MPF investment choices, lure mainland pension funds: financial council

The Financial Services Development Council (FSDC) has proposed several initiatives to expand the investment options for Hong Kong's Mandatory Provident Fund (MPF) and attract more long-term capital, particularly from mainland pension funds, to invest globally. The MPF, the city's compulsory retirement scheme, currently has assets totaling HK$1.67 trillion ($213 billion) and invests in stocks, bonds, and deposits.

The FSDC suggests allowing a portion of the MPF funds to be invested in alternative assets and infrastructure. Additionally, the council recommends reforming capital market processes to reduce the time and costs associated with new listings and fundraising activities. Furthermore, a corporate rescue plan should be introduced to assist troubled companies in restructuring.

These recommendations were presented in a report compiled from input from over 600 market participants, aiming to promote the Hong Kong capital market. The report was published ahead of the anticipated release of the city's first five-year plan on September 16.

Benjamin Hung, a vice-chairman of the FSDC, emphasized that the recommendations form an execution roadmap focused on five key areas: issuer, investor, intermediary, instrument, and infrastructure. He stated that Hong Kong's unique role as a "superconnector" in global finance could be leveraged to become a major capital nexus by fostering an open and interoperable ecosystem.

Other recommendations include expanding the Wealth Management Connect scheme and ETF Connect, as well as promoting the issuance of Hong Kong-dollar and yuan-denominated bonds. The report also calls for a review of the definition of professional investors to include digital asset holdings held in custody by Securities and Futures Commission-licensed platforms.

The FSDC's report comes in the wake of a previous report released in December that urged the city to attract more international listings, as more than 90% of new listings are currently from mainland companies. Hung highlighted the need to capitalize on opportunities arising from geopolitical uncertainties, noting that Hong Kong's unique position offers investors growth potential, market stability, and risk diversification.