HSBC’s MPF funds could lend stock for short selling — never used in 10 years, sparking scrutiny

After the 2011 global market rout, short sellers took the blame for the plunge — and MPF money was dragged into the row. HSBC, the market leader, revealed that the trust deeds of 62 of its MPF constituent funds permit securities lending for short selling, though it stressed the right had never been exercised in a decade.

Can MPF funds lend stock for short selling?

MPF securities lending means a trustee lends out securities held by a fund so borrowers can short them. As of October 2011, the deeds of 62 HSBC MPF constituent funds permitted it, although HSBC stressed it had never been exercised in 10 years; Manulife, AIA, Bank of Communications Trustee, Fidelity, China Life Overseas, Bank of East Asia Trustee and Sun Life all prohibited it.

Why the uproar?

Tan Shaoxing, chairman of the Hong Kong Investors Association, said he was shocked and urged MPF providers to follow the US model: retail investors should be able to choose whether their shares are lent out when opening an account. An MPFA non-executive director also urged the authority to act, including consulting the public on whether MPF lending should be banned outright, to check for loopholes in the current law.

The two sides of lending

MPFA non-executive director Wong Kwok-kin noted lending is not all downside: when markets plunged, blue-chip lending rates reportedly hit 7–8%, and funds can demand collateral — giving members some protection. But he argued the bigger picture matters: if bears use short selling to drive the market down and disrupt financial order, he favours banning MPF lending altogether.

HSBC’s response

An HSBC Insurance spokesman said the company planned to review its fund guidelines and consider amendments, such as explicitly barring MPF assets from lending. The spokesman added that risk factors and investment and lending restrictions were already detailed in key marketing documents, with disclosures made in line with the regulator’s securities-lending rules.

What members can do

Lending terms live in a fund’s offering documents, not on your payslip. When reviewing your MPF portfolio, check the investment-restrictions section of the fund fact sheet — the MPF education hub explains how MPF funds work.