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