MPF brings cheer, for now

May 05, 2015 14:22
The stock market rally is helping Hong Kong people put aside, for the moment, concerns about the political situation in the city. Photo: HKEJ

There is nothing more satisfying than discovering that you have become 5 percent richer overnight, even though you may not be able to actually get your hands on that cash until you turn 65.

Yes, it is a good time for mandatory provident fund (MPF) account holders in Hong Kong, thanks to the surging stock markets.

In April, average returns from the 481 MPF investments funds in Hong Kong stood at 5.28 percent, with the best performing China fund delivering a return of as much as 18.71 percent.

The gains came as the market's benchmark Hang Seng Index shot up 13 percent during April, its best monthly performance in about six years.

Meanwhile in the mainland, the Shanghai Composite Index was up a whopping 18 percent.

Hongkongers indeed have a reason to celebrate. In the first four months of 2015, there was an average return of 8.17 percent on MPF funds, a performance not seen since the MPF's launch 15 years ago.

This news will help offset some of the anger with regard to the performance of the government's Exchange Fund, which reported a 40 percent drop in net income for the first quarter due to foreign exchange losses of HK$33.2 billion.

The worst may be over, you reckon, seeing the stock index go up every day despite a seasonal "sell in May and go away" warning.

Now, this is what we refer to as anesthetic stock market effects which make us forget, at least for a while, the sufferings and unhappiness in other aspects of our lives.

The wealth effect this year may also suppress the fervor in the traditional peak political season as the city braces for the June 4 candlelight vigil and the July 1 rally, not to mention a Legco vote on the universal suffrage plan.

All said, equity investment gains are lifting public mood, but there's still this bigger issue -- housing -- that continues to occupy people's minds.  

There is a growing feeling that the Hong Kong government should adopt the Singapore model that allows MPF money to be used for down-payment for public housing unit purchases.

Despite having very similar economies, Hong Kong people can only watch with envy their Singapore brethren. The Lion City helps its citizens buy their first homes, offering units for the equivalent of just around HK$2 million for 1,000 square feet of living space

MPF Authority chairman David Wong Yau-kar has said that the agency could look into the feasibility of allowing MPF contributions to be used for home purchases.

But any initiative, if there is indeed one, is a long way off.

Meanwhile, let's just hope that our MPF returns will keep going up, but not the residential property prices.

There's no harm in dreaming!

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EJ Insight writer