Chan Ka-keung: weak US and European economies mean more market volatility ahead

On 27 October 2011, Secretary for Financial Services and the Treasury Chan Ka-keung said persistently weak US and European economies had sapped investor confidence, and he expected markets to stay volatile. The remarks came at the most deadlocked phase of the European debt crisis — for MPF members, market volatility was never an abstraction but the movement of their account balances.

Why did Chan expect continued volatility?

In October 2011, persistently weak US and European economies were crushing investor confidence, and Chan expected markets to remain volatile; he said Hong Kong’s regulators already had a range of measures to monitor and assess market risk, and the government was in contact with various institutions to understand their operating conditions. He stressed that effective measures would be taken when needed to keep financial markets functioning normally — the standard crisis-era pledge: monitor, liaise, and act if necessary.

MPFA: Employee Choice Arrangement due next year

Chan also updated the MPF reform timetable: to support the Employee Choice Arrangement, the government would finish drafting the bill to regulate MPF intermediaries, expected before LegCo in December 2011; if passed, implementation could follow in the second half of 2012. In November the government would also put to the Financial Affairs Panel the proposal for an automatic levy-adjustment mechanism for the MPF compensation fund, to lower the average fund expense ratio.

How was the renminbi bond market doing?

On the numbers, renminbi bond issuance in the first nine months of 2011 totalled RMB85.4 billion, triple the count of a year earlier. Chan believed that with the State Council approving the first mainland non-financial institution to issue renminbi bonds in Hong Kong, more companies would follow; the government would keep expanding Hong Kong’s renminbi business, with the RQFII scheme and renminbi bond issuance by state enterprises and the Ministry of Finance all progressing well. In a volatile year, the bond market’s expansion was the other side of money seeking shelter. For how to position an MPF portfolio in volatile markets, see the MPF education hub.