【MPF】Experts’ five MPF investment tips: the two markets with a bullish outlook in the second half of the year

Having survived the “May-June slump,” experts believe that workers should take advantage of market volatility stemming from the U.S. interest rate hikes—causing stock prices to swing—and suggest allocating the Mandatory Provident Fund (MPF) to buy global stocks and Asian stocks on dips in separate portions, betting on a “July rebound.” Based on industry-wide guidance for second-half investment planning, here are 5 shrewd tips:

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(1) Hong Kong stocks keep searching for a bottom: Hong Kong stocks have fallen for 7 consecutive weeks, plunging by 3,721 points or nearly 15%. However, the market expects the Hang Seng Index’s low of 22,620 points on Friday (June 26) to not yet be a bottom—especially as July will see a wave of lock-up expiries 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 dropped by more than 10%.

If members do not want to sell and cut losses at these low levels, new contributions should not put heavy weight into MPF that tracks the Hang Seng Index. For reference, this year’s “bull stock” is the 2x leveraged Southern Hailisi (07709), whose net asset value is as high as 130 billion, exceeding Tracker Fund (02800). Instead, putting about 10% of the allocation into actively managed Hong Kong stock products has an advantage: the portfolio manager’s top priority is stock selection.

GUM’s Chief Investment Officer Liu Jiahong analyzes that traditional internet and tech stocks with larger market capitalizations in the Hang Seng Index lack AI infrastructure themes. As a result, MPF products in Hong Kong that track the index have crashed by 6.3% year-to-date (as of mid-June), making it the weakest MPF category this year. Over the same period, Hong Kong stock MPF for active management fell 3.5%.

(2) Smart selection of Asian stocks: Choose Asian stocks that include Japanese stocks, not just 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 Hynix. In addition, although Asian markets benefit from falling oil prices, a strong U.S. dollar is unfavorable for emerging markets; therefore, the Asian stock weighting in the portfolio should only be about 30–40%, depending on each office worker’s risk tolerance.

(3) Global stocks offer a higher odds bet: Even if market expectations suggest that Japanese and South Korean stocks have not peaked, there are only 3 trustees (Manulife, BOC-Prudential and East Asia) offering Japanese-stock MPF products in the market. Betting on Korean stocks is even more limited—only Haitong provides it, with the smallest market share. If contributors want to catch the upswing in Japanese, Korean, and Taiwanese stocks and ride the “tailwind,” global stocks are likely to gain exposure to the strong markets above.

(4) Reduce positions in Japanese and U.S. stocks in measured amounts when prices are high: For U.S. and Japanese stocks that have remained in a sustained bull market, consider taking profits in phases—first lock in gains.

(5) Diversify risk: Avoid putting everything into one fund. Instead, build a diversified layout to better withstand volatile markets. The so-called “lazy fund” default investment strategy (DIS) includes both stocks and bonds, making it a “wake-up” camp option that balances offense and defense.

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

Meanwhile, Citigroup and CTBC International do not hold MPF licenses, so they cannot comment on MPF assets. However, the views of major banks and experts on stocks, currencies, and bonds can still serve as a reference for contributors.

Citigroup’s 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, this implies potential upside of 8.8%

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

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

CTBC International expert Zhang Haonen: It’s not advisable to fully cut holdings of Japanese and U.S. stocks

Zhang Haonen, Head of Investment for Personal and Business Banking at China CITIC Bank International, said that the second-half investment environment will be affected by the Federal Reserve’s June policy meeting. Although the Fed keeps rates unchanged at 3.5% to 3.75%, it has removed the easing bias, raised inflation expectations, and released signals that possible rate hikes are coming. The expectation is that the high-interest environment will persist, which will increase financing costs and valuation pressure.

The core strategy is to select stocks rather than pick a market. The AI theme is clearly polarizing, and in the short term the market still prefers hardwares or cyclical technology stocks, including memory, semiconductor equipment, storage and networking, and custom chips and other related shares—companies that have tangible capital expenditure and order support. In addition, it is also possible to diversify into high-yield defensive assets such as financials and utilities.

U.S. and Japanese stocks should not be fully reduced. 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, making the market breadth narrow. Against the backdrop of the broader market setting new highs repeatedly, only a small proportion of index constituents (single-digit percent) reach new highs. With the recent rally having been too fast, investors should also pay attention to the risk of a pullback—especially because a rising U.S. dollar is unfavorable for Asian stocks—avoid over-concentration.

Hong Kong stock valuations look attractive—believe there is support at 22,600 points

Hong Kong stock valuations are attractive at this stage (as of June 23, 2026, the Hang Seng Index’s forward P/E is approximately 10.7x). In the short term, there may be room for a rebound. Besides index-weighted stocks, the overall preference is for high-dividend stocks for allocation, including mainland bank stocks (net interest margin bottoming out, stable dividends, and northbound capital inflows), mainland insurance stocks (benefiting from national policies and diversified earnings), and recently weaker telecom stocks (stable cash flow, high-yield defense, and growth potential in 5G/cloud businesses). This can enhance defensiveness and wait for third-quarter results for verification. At the same time, 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 between 22,600 and 23,000.

Since May 22, after the crackdown on cross-border illegal investments in the Mainland, Hong Kong stocks have fallen but not risen

Expert forecasts for Hong Kong stocks:

• East Asia Bank reduces its basic scenario target price for the Hang Seng Index to 27,100 points

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

Analysis blames Hong Kong stocks’ weakness on 6 major culprits:

• (1) Hoe the weak to support the strong: Faced with the semiconductor super-cycle and the chip frenzy, unfortunately most of these companies are not Hang Seng Index constituents. Global funds conduct pair trades—buying strong Taiwan, South Korea, and Japan stocks and selling weaker Hong Kong stocks.

• (2) Northbound capital shrinks: Since May 22, the China Securities Regulatory Commission suddenly tightened cross-border illegal stock trading, heavily penalizing Futu, Changqiao, and Tiger Brokers, and requiring illegal funds to clear out positions within 2 years. Although the market expects the amount involved may be about 250 billion to 300 billion, Hong Kong stocks have been more likely to fall than rise in the month since the new rules.

• (3) The “watering down” wave: Hong Kong stocks’ high this year was 28,056 points in January. Last Friday’s low suddenly appeared at 22,518 points—down 19.7% cumulatively from the high—just one step away from a 20% “technical bear market.” Moreover, July will bring a wave of IPO lock-up expiries. It is estimated that the share lock-up period covering 255 billion worth of shares will expire. For example, “odd-lot contrarian stock” Zhipu has a lock-up expiry date on July 8, etc. Goldman Sachs estimates that over the next 12 months, around 274 billion U.S. dollars (about HK$2.13 trillion) in new shares supply may come to the market, accounting for about 4.4% of the total market capitalization—an all-time high.

• (4) Strong U.S. dollar: The U.S. dollar surged by about 3% in the first half of the year. External media described it as the strongest in nearly 40 years. A stronger U.S. stock market and a stronger dollar attract hot money back to the U.S. HSBC believes that a sharp rise in the U.S. dollar could become one of the biggest “pain trades” in the second half of the year. Meanwhile, the U.S. Treasury market has reversed: early this year, investors expected the yield curve to steepen, but persistent high inflation, strong labor market resilience, and a more hawkish Fed have flattened the yield curve.

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

• (6) Follow the decline, not the rise: Hong Kong stocks are being hit by both internal and external factors. Apple product price hikes have triggered concerns about chip demand. Last week’s “Black Friday” sparked a global chip stock correction. Adding to that, after SpaceX—the king of IPO fundraising—listed, its stock plunged 30%, dragging down OpenAI, the developer of the AI chatbot ChatGPT. Rumors say OpenAI refuses to lower its trillion-dollar valuation and may delay its listing until 2027.

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

Standard Chartered Wealth Solutions Chief Investment Office recommends overweighting global stocks. Its baseline macroeconomic view is a soft landing, which would be favorable for risk assets. Strong earnings growth that supports U.S. stocks is expected to continue into the second half, though volatility may increase. It also recommends overweighting Asian stocks, as the region remains highly sensitive to oil prices. Easing tensions in the Middle East is one of the key factors prompting a renewed overweight. Earnings growth outperformance in the next two years is also a leading driver.

Risk factors:

• Interest rates: The market expects the Fed to start raising rates as early as September, adding 0.75%.

• High oil prices: Morgan Stanley expects the average spot Brent crude oil price in the third and fourth quarters to be 75 U.S. dollars per barrel.

• Elections: The U.S. midterm elections for Congress will be held on November 5. It is expected that Trump will again push the tariff and China card.

MPF ratings urge contributors to choose default investment funds

Francis Chung, Chairman of MPF Ratings, an independent Hong Kong MPF research, opinion, and education institution: The expected annualized return of Asian stocks in the first 6 months was 27%, delivering the best first-half performance on record, driven by outstanding technology sectors in South Korea and Taiwan. By contrast, China/Hong Kong stocks are the most popular and largest MPF category, and U.S. stocks are the fastest-growing asset class—both were the worst performers in June.

This also highlights the importance of diversification, further confirming that the low-fee default investment strategy fund (DIS) required under the MPF Authority’s regulations is still 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%.

Finally, the MPF Authority Chairperson Liu Maijiaxuan expects that “eMPF” will reduce MPF administrative fees by two-thirds.