[MPF] Experts Offer Five MPF Investment Tips: Two Markets to Watch in the Second Half of the Year

After getting through the “May-June slump” and the “five poor, six barren months,” experts believe that workers should take the opportunity when market conditions are periodically disrupted by U.S. interest rate hikes, causing stocks to swing and turn volatile. They recommend that MPF (Mandatory Provident Fund) be allocated in tranches to accumulate global stocks and Asian stocks, aiming to bet on a “July turnaround.” Based on industry-wide recommendations for investment positioning in the second half of the year, here are 5 shrewd tips:

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(1) Hong Kong stocks keep searching for a floor: Hong Kong stocks have been falling for 7 consecutive weeks, down 3,721 points or nearly 15% in total, but the market still expects that the Hang Seng Index’s low of 22,620 on last Friday (June 26) has not yet hit bottom—especially as July will bring a new wave of lock-up expirations for semi-new stocks. This is because the Hang Seng Index lacks popular industry-chain stocks such as artificial intelligence (AI); in the first half of the year, it has already plunged by more than 10%.

If members do not want to suffer sell-at-a-loss damage at low levels, new contributions should not heavily increase allocations to MPF funds that track the Hang Seng Index. As a reference for this year’s “bull stocks,” take the 2x leveraged Southern Hynix (07709): its net asset value is as high as 130 billion yuan—surpassing the Tracker Fund (02800). Yet it roughly puts about 10% of its fund allocation into active Hong Kong stock products. The benefit is that the portfolio manager places top priority on stock selection.

GUM’s Chief Investment Officer Liu Jiahong analyzes that traditional large-cap tech stocks within the Hang Seng Index lack AI infrastructure themes. As a result, Hong Kong stock MPF funds tracking the index have sharply fallen 6.3% since the beginning of the year (as of mid-June), making them the weakest MPF category this year; in the same period, Hong Kong stock MPF funds fell 3.5%.

(2) Choose Asian stocks wisely: Choose Asian stocks that include Japanese stocks, rather than simply Asia-Pacific funds—because the latter only cover the Taiwan and South Korea markets. Moreover, South Korea is easily swayed by its “twin stocks”: Samsung Electronics and Hynix. In addition, while Asian markets benefit from a pullback in oil prices, a strong U.S. dollar is unfavorable for emerging markets. Therefore, the weighting of Asian stocks in a portfolio should only be about 3–4 tenths, depending on each worker’s risk tolerance.

(3) Global stocks offer higher odds: Even though market expectations suggest that Japan and Korea stocks have not topped out, there are only 3 trustees (Manulife, BOCI-Prudential, and East Asia) that offer Japanese stock MPF funds. Betting on Korean stocks is only available through Haitong, which has at least the smallest market share supply. If contributors want to jump on the “ride the tailwind” rally in Japanese, Korean, and Taiwan stocks, global stock allocations are likely to extend into the strong markets mentioned above.

(4) Reduce exposure to Japanese and U.S. stocks with measured selling at higher levels: For the U.S. and Japan stocks that have remained in a persistent bull market, you may cash out in stages and first lock in profits.

(5) Diversify risk: Avoid putting everything into a single fund. Instead, make diversified allocations to hope to counter volatility in the market. The so-called “lazy fund” default investment strategy (DIS), which covers stocks and bonds, is the “sober-minded” option that balances offense and defense.

Citigroup expects Japan stocks to surge to 90,000 points by year-end, with a potential upside of 28%

On the other hand, Citigroup and BOC International have no MPF licenses, so they cannot comment on MPF assets. However, the views of major banks and experts on stocks, FX, and bonds can serve as references for contributors.

Citigroup Bank Investment Strategy and Asset Allocation Department:

• Year-end S&P 500 index target: 8,100 points. Based on the current level of 7,440 points, the potential upside is 8.8%

• Year-end Nikkei 225 index target: 90,000 points. Based on the current level of 70,062 points, the potential upside is 28%

• Year-end CSI 300 index target: 5,600 points. Based on the current level of 4,979 points, the potential upside is 12%; the forecast for mid-next year is 5,700 points

CITIC Bank International expert Zhang Haonen: It’s not advisable to cut Japanese and U.S. stock holdings all at once

Zhang Haonen, Investment Director for Personal and Business Banking at China CITIC Bank (International), said that the investment environment in the second half of the year will be affected by the U.S. Federal Reserve’s June policy meeting. The Fed is expected to keep interest rates unchanged at 3.5% to 3.75%, but it will remove its easing bias, raise inflation expectations, and release signals that suggest possible rate hikes. They expect the high-interest environment to continue, which will increase financing costs and valuation pressure.

The core strategy is to choose stocks rather than choose the whole market. The AI theme is clearly diverging. In the short term, the market still favors “hard” hardware or cyclical technology stocks, including memory, semiconductor equipment, storage and networking, and custom chips—companies in these areas have real capital expenditure and order support. In addition, investors can also diversify into high-yield defensive assets such as financials and utilities sectors.

U.S. and Japanese stocks should not be reduced across the board. However, stock market gains are mainly driven by a small number of shares (including other Asian markets such as South Korea and Taiwan). Most stocks do not participate enough, resulting in narrow market breadth. Against the backdrop of the market repeatedly setting new highs, only a small portion of index constituents (single-digit percentage) reach new highs. Also, with the recent rally moving too quickly, investors need to pay attention to the risk of pullbacks—especially since a rising U.S. dollar is unfavorable for Asian stock markets—so avoid excessive concentration.

Hong Kong stocks have attractive valuations; believe 22,600 points has support

At the current stage, Hong Kong stocks have attractive valuations (as of June 23, 2026, the Hang Seng Index’s forward price-to-earnings ratio is about 10.7 times). In the short term, there may be room for a rebound. Aside from index heavyweights, overall preferences are to allocate to high-dividend stocks, including mainland bank stocks (net interest margin at the bottom, stable dividends, and northbound capital inflows), mainland insurance stocks (benefiting from national policy and diversified earnings), and recently weaker telecom stocks (stable cash flow, high-yield defensive characteristics, and 5G/cloud business growth potential), which can enhance defensiveness while waiting for third-quarter earnings to provide verification. At the same time, it is also necessary to closely monitor U.S. PCE data, China’s July Politburo meeting, and the trend of the U.S. dollar. It is expected that the Hang Seng Index will see short-term support in the 22,600 to 23,000 range.

Since May 22, when Mainland China cracked down on cross-border illegal investment, Hong Kong stocks have fallen but not risen

Experts’ forecasts for Hong Kong stocks:

• East Asia Bank lowered its base-case scenario target price for the Hang Seng Index to 27,100 points

• Standard Chartered cut its 12-month base range forecast for the Hang Seng Index from 28,000–29,000 points in the first quarter down to the latest 25,500–26,500 points

Analysis attributes Hong Kong stocks’ weakness to 6 major reasons:

• (1) Tearing down the weak while propping up the strong: Facing the semiconductor supercycle and the chip frenzy, unfortunately, most related stocks are not constituents of the Hang Seng Index. Global funds conduct pair trades—buying strong Taiwan, South Korea, and Japan stocks, while selling weak Hong Kong stocks.

• (2) Northbound capital shrinks: Since May 22, the Mainland China Securities Regulatory Commission suddenly tightened oversight of cross-border illegal stock trading, heavily penalizing Futu, Changqiao, and Tiger Brokers, and requiring illegal funds to clear out within two years. Although market expectations suggest the amount involved is about 250 billion to 300 billion yuan, after the new rules, Hong Kong stocks are more likely to fall than to rise.

• (3) The “sucking” IPO unlock wave: Hong Kong stocks’ high this year was 28,056 points in January. Last Friday, the low briefly appeared at 22,518 points. From the high, stocks have already accumulated a decline of 19.7%, which is only one step away from a 20% drop—the “technical bear market.” Moreover, July will bring an IPO lock-up expiration wave. It is estimated that the share prohibition period will end for 255 billion yuan worth of shares. For example, the “odd beauty of the market in a downturn” Zhipu’s unlock period is on July 8. Goldman Sachs estimates that in the next 12 months, there may be about USD 274 billion (about HKD 2.13 trillion) in new share supply, accounting for about 4.4% of the total market value—an all-time high.

• (4) Strong U.S. dollar: In the first half of the year, the U.S. dollar surged by about 3%. Foreign media described it as the strongest in nearly 40 years. The rally in U.S. stocks and the strengthening dollar attracted hot money back to the United States. HSBC believes that the sharp rise in the dollar may become one of the biggest “pain trades” in the second half. Meanwhile, the U.S. Treasury market has reversed course. At the beginning of the year, investors expected the yield curve to steepen. However, stubbornly high inflation, robust labor market resilience, and a more hawkish central bank have caused the yield curve to flatten.

• (5) Worry about more rate hikes: The “rate” demon has struck the Earth. Bank of America expects the Fed to raise rates 3 times in the second half.

• (6) Falling but not rising: Hong Kong stocks are pressured from both domestic and overseas fronts. Apple product price increases have raised concerns about chip demand. Last week, the “Black Friday” event triggered a global chip stock correction. In addition, after SpaceX, the biggest fundraising king of IPOs in history, listed and then plunged 30%, it dragged on OpenAI, the developer of the AI chatbot ChatGPT. There are reports that OpenAI refused to cut its multi-trillion-dollar valuation and may delay its listing until 2027.

Standard Chartered Wealth Solutions Chief Investment Office recommends increasing global stocks + Asian stocks

Standard Chartered Wealth Solutions Chief Investment Office recommends over-allocating to global stocks. Their base-case forecast is that the macroeconomy will achieve a soft landing, which is favorable for risk assets. Strong earnings growth will continue to support U.S. stocks into the second half, but volatility may intensify. They also recommend over-allocating to Asian stocks. Within the region, markets remain highly sensitive to oil prices. Easing tensions in the Middle East is one of the key factors prompting the decision to re-overweight the allocation. Earnings growth in the region is leading in 2025 and 2026.

Risk factors:

• Interest rates: It is expected that the central bank may start raising rates as early as September, adding another 0.75 percentage points

• High oil prices: Morgan Stanley expects that the average spot Brent crude oil price in the third and fourth quarters will be USD 75 per barrel

• Elections: The U.S. holds midterm elections on November 5. It is expected that Trump will again play the tariff and China card

Pension fund ratings urge contributors to choose default investment strategies

Francis Chung, Chairman of MPF Ratings, a Hong Kong independent institution for MPF research, viewpoints, and education: In the first 6 months, the expected return rate for Asian stocks was 27%, creating the best first-half performance on record, thanks to outstanding technology sectors in South Korea and Taiwan. In contrast, China and Hong Kong stocks—both the most popular and largest MPF category—and U.S. stocks, which have the fastest growth among asset classes, recorded the worst performance in June.

This also highlights the importance of diversification. It further confirms that the low-fee default investment strategy fund (DIS) required by the MPFA remains a quality option worth considering for members. In the first half of the year, DIS rose 8.5%, outperforming the overall return of 5.1%.

One final reminder: MPFA Chairman Liu Maijiaxuan expects that “eMPF” will reduce MPF administrative fees by two-thirds.