Can MPF Funds Invest in RMB Products? The 30% HKD Rule Explained

In November 2011, the MPFA’s “MPF Boy” column fielded an intriguing question from an insurance agent: a client had asked whether MPF funds could invest in renminbi products such as bonds, equities or deposits. The answer may surprise many — provided the relevant investment restrictions and guidelines are met, MPF funds may invest in non-Hong Kong-dollar products, including RMB products, and some MPF funds on the market already held RMB bonds and deposits.

Can MPF funds invest in RMB products?

Yes. As of November 2011, MPF investment rules did not prohibit funds from investing in RMB products, and some funds already held RMB bonds and deposits. But the limits are strict: constituent funds must use the Hong Kong dollar as their dealing currency and hold at least 30% of their investments in HKD assets; members buy and sell in HKD even when a fund holds foreign-currency products.

Three investment limits, whatever the MPF fund type

Regardless of MPF fund type, RMB-denominated securities or bonds must meet the rules: first, funds may invest in any securities listed on an MPFA-approved exchange, such as RMB-denominated securities listed on the Hong Kong Stock Exchange; second, bonds must be rated at least S&P BBB or Moody’s Baa2 — RMB bonds are no exception; third, the 30% HKD investment and HKD-dealing requirements above.

Why regulate so tightly?

The MPFA noted that MPF forms part of members’ retirement reserves, so investment rules aim to protect members’ interests, reduce long-term investment risk, and still offer enough choice to pursue members’ best interests. Questions on fund investment limits: MPFA hotline 2918 0102 or the MPF education hub.