MSCI introduces new Hong Kong MPF indices

MSCI Inc has launched the MSCI Hong Kong Mandatory Provident Fund (MPF) Indices, a new gauge reflecting the current investment restrictions imposed on MPF funds by the Hong Kong Mandatory Provident Fund Schemes Authority (MPFA), which include a minimum 30% Hong Kong dollar (HKD) exposure requirement.

The MSCI Hong Kong MPF Indices have been developed to be licensed for use as benchmarks or as the basis for financial products such as exchange-traded funds and structured products.

Theodore Niggli, head of the MSCI index business in Asia Pacific said that since their inception in 2000, the Hong Kong MPF schemes have grown in size and complexity, and that it is not surprising that many participating firms are keen to see more innovation in the provision of relevant MPF indices.

"In addition to providing an extensive family of MPF indices, we are also introducing a novel index construction methodology that eliminates the need for expensive foreign exchange hedging to comply with the 30% minimum HKD exposure," he said. "We believe that the MSCI Hong Kong MPF Indices will be adopted not only for benchmarking purposes, but will also help in the creation of lower cost fund structures."

SRP data shows that there are currently 3,953 structures linked to 109 different MSCI indices across all jurisdictions with the US (1,308 structures), Sweden (828 structures) and Germany (417 structures) as the markets with the most products linked to MSCI underlyings.

In the Asia-Pacific region, there are over 360 live products linked to MSCI indices. The markets with the highest number of MSCI-linked products are China with 71 structures, Australia with 42 structures, and South Korea with 20 structures.

Three types of indices are available: The MSCI MPF Domestic Indices, the MSCI MPF Hedged Indices and the MSCI MPF Unhedged Indices - each differing in terms of how the MPFA currency exposure requirement is addressed. The MSCI MPF Domestic Indices, for instance, applies a 30% floor with a buffer to the weight of the HKD-denominated component, eliminating the need for currency hedging and therefore potentially reducing costs.

There are 50 MSCI Hong Kong MPF Indices in total, providing greater global and regional index coverage than currently available in the market, including MPF indices for the MSCI ACWI, MSCI World and MSCI Emerging Markets indices.

Industry Insights

Data Insights

Webinars

Special Reports

Market

MSCI introduces new Hong Kong MPF indices