【MPF】Experts share five MPF investment tips—both markets are seen to be bullish in the second half

Having made it through the “five miserable months and six desperate months,” experts believe that office workers should take advantage of the market’s frequent fluctuations caused by the United States’ interest rate hikes. This has led to stock volatility and may trigger sharp turnarounds in share prices. They recommend that MPF (Mandatory Provident Fund) contributions be allocated in tranches to buy global stocks and Asian stocks on dips, aiming to “turn things around in July.” 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 continue to search for a bottom: Hong Kong stocks have fallen for 7 consecutive weeks, dropping by 3,721 points or nearly 15%. But the market still expects that the Hang Seng Index’s low on last Friday (June 26) at 22,620 points has not yet marked the bottom—after all, July will bring a wave of unlock expirations for semi-new shares. This is also because the Hang Seng Index lacks widely sought-after 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 losses from selling at low levels, it is not advisable for new contributions to heavily reallocate into MPF products that track the Hang Seng Index. For reference, this year’s “bull stock”: the two-times leveraged Southern Haili (07709), whose net asset value is as high as 130 billion yuan, exceeding Tracker Fund (02800). Instead, it keeps roughly one-tenth of the allocation in active Hong Kong stock products. The benefit is that the portfolio manager prioritizes stock selection.

GUM’s Chief Investment Officer, Liu Ka-hung, analyzes that large-cap traditional tech stocks with higher market capitalization within the Hang Seng Index lack an AI infrastructure theme. Hong Kong-stock MPF funds tracking the index have plunged 6.3% year-to-date (as of mid-June), making this the weakest MPF category this year. In the same period, Hong Kong-stock MPF funds fell 3.5%.

（2）Choose Asian stocks wisely: It is advisable to pick Asian stocks that include Japanese stocks, rather than simply investing via Asia-Pacific funds, because the latter only cover the Taiwan and South Korea markets. South Korea is easily swayed by its “twin stocks”: Samsung Electronics and SK Hynix. Moreover, although Asian markets benefit from falling oil prices, a strong US dollar is unfavorable for emerging markets. Therefore, the weighting of Asian stocks in a portfolio should be only about 30%–40%, depending on how much risk office workers can bear.

（3）Global stocks have higher odds: Even if market expectations suggest that Japanese and South Korean stocks have not topped out yet, there are only 3 trustees (Manulife, BOC-Prudential, and BEA) offering MPF products investing in Japanese stocks in the market. Betting on South Korea stocks is only available through Haitong, which supplies products with the smallest market share. If contributors want to catch the tailwind of Japan, South Korea, and Taiwan stocks rising, global stocks are expected to gain exposure to the strong markets mentioned above.

（4）Trim positions in a measured way on strength for Japanese and US stocks: For US stocks and Japanese stocks that have continued in a sustained bull market, you may sell in stages and lock in profits first.

（5）Diversify risk: Do not bet everything on a single fund. You should make diversified allocations to try to withstand market volatility. The Default Investment Strategy (DIS), commonly known as the “lazy fund,” covers both stocks and bonds—making it a “wake-up” style option with both offense and defense.

Citigroup expects Japanese stocks to hit 90,000 points by year-end; potential upside of 28%

On the other hand, Citigroup and Citibank International, among others, do not hold 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’s Investment Strategy and Asset Allocation Department:

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

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

• The year-end CSI 300 index target is 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 International expert Zhang Haoh-en: It’s not advisable to reduce Japanese and US stocks all at once

Zhang Haoh-en, Investment Head for Personal and Business Banking at China CITIC Bank International, stated that the investment environment in the second half of the year will be affected by the US Federal Reserve’s June policy meeting. The Fed will keep interest rates unchanged at 3.5% to 3.75%, but it removed the easing bias, raised inflation expectations, and released signals that further rate hikes are possible. It is expected that the high-interest-rate environment will persist, which will increase financing costs and valuation pressure.

The core strategy is to pick stocks rather than pick markets. The AI theme is clearly diverging. In the short term, the market still prefers hardware or cyclical technology stocks, including memory, semiconductor equipment, storage and networking, customized chips, and related shares. These companies have real capital expenditure and order support. In addition, it is also possible to diversify at the same time into high-yield defensive assets such as financial and utilities sector stocks.

US and Japanese stocks should not be reduced across the board. However, stock-market gains are mainly driven by a small number of stocks (including other Asian markets such as South Korea and Taiwan). Most stocks do not participate enough, so market breadth remains narrow. Against the background of repeated new highs across the broader market, only a small portion of index constituents make it to new highs (single-digit percentages). Moreover, with the rally having accelerated recently, investors also need to pay attention to the risk of pullbacks—especially because a rising US dollar is unfavorable for Asian stock markets. Avoid excessive concentration.

Hong Kong stocks look attractively valued; believe 22,600 points has support

The valuation of Hong Kong stocks is attractive at this stage (as of June 23, 2026, the Hang Seng Index’s forward price-to-earnings ratio is approximately 10.7x). In the short term, there may be room for a rebound. In addition to index-weighted stocks, the overall preference is to allocate to high-dividend stocks, including mainland banks (net interest margins at a bottom, stable dividends, and northbound capital inflows), mainland insurers (benefiting from national policies and diversified earnings), and recently weaker telecom stocks (stable cash flow, high-dividend defense, and growth potential in 5G/cloud business). This can enhance defensiveness, and you should also wait for third-quarter results to validate the outlook. At the same time, it is necessary to closely monitor US PCE data, China’s July Politburo meeting, and the trend of the US dollar. It is expected that the Hang Seng Index will see short-term support between 22,600 and 23,000 points.

Since May 22 crackdown on cross-border improper investment, Hong Kong stocks fall but don’t rise

Experts’ forecasts for Hong Kong stocks:

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

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

Analysts attribute Hong Kong stocks’ weakness to 6 major reasons:

• （1）Prying weak to support strong: Faced with the semiconductor super cycle and a chip frenzy, unfortunately, most of the 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 weaker Hong Kong stocks.

• （2）Northbound capital shrinks: Since May 22, the CSRC abruptly tightened cross-border illegal stock trading, imposed heavy penalties on Futu, Longbridge, and Tiger Securities, and required that violating funds clear out within 2 years. Although the market is expected to involve about 250 billion yuan to 300 billion yuan, with the new rules having been in place for more than a month, Hong Kong stocks have been more prone to fall than rise.

• （3）The “liquidity draining” wave: Hong Kong stocks’ annual high this year was 28,056 points in January. Last Friday, the low suddenly appeared at 22,518 points. From the high, it has already cumulatively dropped 19.7%, leaving just a step away from the “technical bear market” of a 20% decline. What’s more, July will bring an IPO unlock expiration wave. It is estimated that the lock-up ban period for 255 billion yuan worth of shares will expire. For example: the “oddball in a downturn” Zhipu will have its unlock period on July 8. Goldman Sachs estimates that over the next 12 months, there may be about 274 billion US dollars (about 2.13 trillion Hong Kong dollars) of new share supply, accounting for about 4.4% of the total market capitalization—an all-time high.

• （4）Strong US dollar: In the first half of the year, the US dollar surged by about 3%. Reports from foreign media say it is the strongest in nearly 40 years. The US stock market and the stronger dollar attract hot money back to the United States. HSBC believes that a sharp rise in the dollar could become one of the biggest “pain trades” in the second half of the year. Meanwhile, the US Treasury market has reversed. At the beginning of the year, investors expected the yield curve to steepen, but persistent high inflation, a labor market with strong resilience, and a more hawkish Fed have caused the yield curve to flatten.

• （5）Worry about more rate hikes: “The interest-rate demon” is striking the globe. Bank of America expects the Fed to hike rates 3 more times in the second half of the year.

• （6）Falling without rising: Hong Kong stocks are battered by pressure from both inside and outside. Apple’s product price increases have sparked concerns about chip demand. Last week’s “Black Friday” triggered a global adjustment in chip stocks. On top of that, after SpaceX—the biggest IPO fundraising king in history—listed and then plunged 30%, it also affected OpenAI, the developer of the AI chatbot ChatGPT. It is rumored that the company refused to reduce its trillion-dollar valuation, or may delay its listing until 2027.

Standard Chartered Wealth Solutions’ Chief Investment Office recommends adding exposure to global stocks + Asian stocks

Standard Chartered Wealth Solutions’ Chief Investment Office recommends an overweight allocation to global stocks. Its base-case forecast for the macroeconomy is a soft landing, which favors risk assets. Strong earnings growth supporting US stocks is expected to continue into the second half of the year, though volatility may increase. It also recommends an overweight allocation to Asian stocks. Within the region, markets remain highly sensitive to oil prices, and easing tensions in the Middle East is one of the key factors behind the renewed decision to overweight. Earnings growth is expected to lead in the next two years.

Risk factors:

• Interest rates: It is expected that the Fed could start raising rates as early as September, adding 0.75 percentage points in total

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

• Elections: The US will hold midterm elections for Congress on November 5, and it is expected that Trump will again pursue tariffs and the China card

MPF Ratings calls on contributors to choose default investment funds

Francis Chung, Chairman of MPF Ratings, an independent Hong Kong MPF research, views, and education institution: The expected return rate for Asian stocks in the first 6 months is 27%, creating the best first-half performance on record, driven by outstanding performance from technology industries in South Korea and Taiwan. In contrast, Mainland China–Hong Kong stocks, as the most popular and largest MPF category, and US stocks, as the asset class with the fastest growth, both posted the worst performance in June.

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

Lastly, MPFA Chairman Lau Mak Ka-hin expects that “eMPF” will reduce administrative fees for MPF by two-thirds.