Hong Kong Shue Yan College ECON 310 Financial

Hong Kong Shue Yan College ECON 310 Financial Institutions in Hong Kong Term Paper 2006 Fall 1

The Comparison between the MPFs provided by Bank (HSBC) and Insurance Company (Manulife) 044040 Quin 2

Section 4, Group 6 • • • 044012 044013 044018 044028 044040 044052 044040 Quin Christy, Cheung Wai Hung Annie, Chong Suet Yan Roxanne, Yu Kwan Yee Carrie, Ho Ka Lai Quin, Leung Pui Shan Katy, Lee Wai Kit 3

Introduction of MPF pension plan 044040 Quin 4

What is a pension plan? – an asset pool – represent the fastest-growing financial intermediary. 044040 Quin 5

Reasons pension plan becomes popular – Life expectancy increase – Ageing problem 044040 Quin 6

Type of pension plans – Private Pension Plans – Public pension Plan • Sponsored by a governmental body. e. g. , MPF 044040 Quin 7

Public pension Plan Mandatory Provident Fund (MPF) 044040 Quin 8

Key features of the MPF – Coverage and Exemption • Coverage: Employee, Employer, Self-Employed Person • Exempt persons: Domestic employees, Selfemployed hawkers; 044052 Katy 9

Key features of the MPF – Contributions • Both employers and employees pay a minimum contribution of 5% of relevant income • Self-employed persons have to contribute 5%. 044052 Katy 10

Key features of the MPF • minimum and maximum levels of relevant income are: – Minimum – Maximum - HK$4, 000 per month - HK$20, 000 per month • can withdraw accrued benefits in a lump sum at the age of 65 044052 Katy 11

Key features of the MPF • Immediate Vesting Contributions paid and investment earnings are fully and vested with the member as accrued benefits. 044052 Katy 12

Key features of the MPF • Portability When a member changes job, benefits can be transferred • Preservation Benefits will be preserved and became payable at age of 65 or die 044052 Katy 13

Description of HSBC and Manulife Background of HSBC 044013 Annie 14

Background of HSBC – one of the world’s largest banking and financial services organizations – operated in Hong Kong more than 140 years – has over 9, 700 offices in 77 countries and territories 044013 Annie 15

Background of HSBC – The leader position in the pension market – HSBC and subsidiary Hang Seng Bank have secured 400, 000 employees for MPF – 40% targeted market share in the MPF business. 044013 Annie 16

MPF Product in HSBC • HSBC offers two master trust schemes – Super. Trust Plus 044013 Annie 17

Super. Trust MPF Scheme • members with less investment experience • investment time frames from short to long term 044013 Annie 18

Super. Trust MPF Scheme • 5 different funds – Capital Preservation Fund (low-risk) – Guaranteed Fund (low-risk) – Balanced Fund (medium-risk) – Growth Fund (high-risk) – Hang Seng Index Tracking Fund (high-risk) 044013 Annie 19

Super. Trust Plus MPF Scheme • members with a greater investment knowledge and experience • In addition to 5 Super. Trust Funds, it offers 5 more funds 044013 Annie 20

Super. Trust Plus MPF Scheme – Stable Growth Fund (medium-risk) – Asian Equity Fund (high-risk) – European Equity Fund (high-risk) – Hong Kong Equity Fund (high-risk) – North American Equity Fund (high-risk) 044013 Annie 21

HSBC MPF Service • Quality MPF Management • Keeping information up to date • Smart Money Management and Fund Switching 044013 Annie 22

HSBC MPF Service • providing convenient communication – Hotline – Website – Branch and ATM network 044013 Annie 23

Description of HSBC and Manulife Background of MAULIFE 044018 Roxanne 24

Background of MAULIFE • conducts business in Hong Kong for more than 100 years • expanded into MPF market since 2000 • one of the largest player in the MPF market (15. 5% market share) 044018 Roxanne 25

Background of MAULIFE • more than 720, 000 pension accounts • managing pension assets at about HK$307 billion 044018 Roxanne 26

MPF Product in MANULIFE • Two MPF schemes • Manu-Lifestyle (MPF) Scheme • Manulife Global Select (MPF) Scheme 044018 Roxanne 27

Manu-Lifestyle (MPF) Scheme • provided to conservative investors • Simple and efficient approach 044018 Roxanne 28

Manu-Lifestyle (MPF) Scheme • 5 different Funds – Capital Preservation Fund – Interest Fund – Stable Fund – Growth Fund – Aggressive Fund 044018 Roxanne 29

Manulife Global Select (MPF) Scheme • provided to sophisticated and conservative investors • offers a choice of investment expertise and extensive range of funds 044018 Roxanne 30

Manulife Global Select (MPF) Scheme • provides eleven more funds than Manulifestyle Scheme • provide a very aggressive high-risk option – Manulife MPF China Value Fund 044018 Roxanne 31

Manulife MPF Service • computerized call center • personal visits • customer-oriented seminars 044018 Roxanne 32

Manulife MPF Service • Newsletters • regular benefit statements • on-line service centre • Smart Call telephone service. 044018 Roxanne 33

Comparison between the MPF Scheme of HSBC and Manulife 044012 Christy 34

III. Comparison between the MPF Scheme of HSBC and Manulife • Two MPF Scheme – Low-risk Fund – Medium-risk Fund – Aggressive High-risk Fund 044012 Christy 35

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme 044012 Christy 36

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • provided to conservative investors • provided to less investment experience investor 044012 Christy 37

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Conservative Low-Risk Fund – Manulife • Capital Preservation Fund • Interest Fund – HSBC • Capital Preservation Funds • Guaranteed Fund 044012 Christy 38

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Capital Preservation Funds – mandated by the MPF Schemes Ordinance – do not have a guarantee of capital and interest 044012 Christy 39

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme Manu-lifestyle Scheme HSBC Super Trust Scheme Performance as at October 31 2006 Capital Preservation Fund Since Launch (%) 5. 78 15 • invest in grade Hong Kong dollar denominated monetary instruments 044012 Christy 40

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Manulife Capital Preservation Fund – mainly hold Hong Kong Bonds – stable return as the prescribed savings rate published by the MPFA • HSBC Capital Preservation Fund – 100% hold in Hong Kong dollar denominated monetary instrument – achieve a rate of return higher than the average bank saving rate 044012 Christy 41

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme Manu-lifestyle Scheme HSBC Super Trust Scheme Performance as at Interest Fund October 31 2006 Guaranteed Fund Since Launch (%) 0. 4 044012 Christy 1. 65 42

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Manulife MPF Interest Fund – fully hold in Hong Kong Bonds – interest rate is determined by the bond interest • HSBC Guaranteed Fund – nearly 50% hold in equity – provide 0. 25% interest rate per annually 044012 Christy 43

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • conservative medium-risk fund • Manulife MPF Stable Fund vs. HSBC Balanced Fund – Provide capital growth 044012 Christy 44

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme Manu-lifestyle Scheme HSBC Super Trust Scheme Performance as Stable Fund at October 31 2006 Balanced Fund Since Launch (%) 32 16. 75 HSBC invest more equity than Manulife 044012 Christy 45

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Manulife MPF Stable Fund – mainly in bonds – with an interest guarantee upon the occurrence of certain pre-determined events • HSBC Balanced Fund – Assets Portfolio mainly in equity – No interest guarantee 044012 Christy 46

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Compare the Aggressive high-risk fund – Manulife • Growth Fund • Aggressive Fund – HSBC • Growth Fund • Hang Seng Index Tracking Fund 044012 Christy 47

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme Manu-lifestyle Scheme HSBC Super Trust Scheme Performance as at Growth Fund October 31 2006 Growth Fund Since Launch (%) 32. 1 044012 Christy 34. 22 48

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Growth Funds • helped to maximize the investment return • mainly in equity 044012 Christy 49

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Manulife Aggressive Fund vs. HSBC Hang Seng Index Tracking Fund • Provide long term capital growth 044012 Christy 50

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme Manu-lifestyle Scheme HSBC Super Trust Scheme Performance as at Aggressive Fund October 31 2006 Hang Seng Tracking Fund Since Launch (%) 41. 10 33. 18 Better Performance of Hang Seng Index in recent year 044012 Christy 51

Manu-lifestyle Scheme vs. HSBC Super Trust Scheme • Manulife MPF Aggressive Fund – a unitized equity fund – mainly in equities and equity-related investments. • Hang Seng Index Tracking Fund – Invest in Hang Seng Index – the performance of the Hang Seng Index 044012 Christy 52

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme 044028 Carrie 53

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme – provided to a greater investment knowledge and experience investor – offers a choice of investment expertise – extensive range of funds 044028 Carrie 54

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme • Compare the conservative low-risk fund Manulife Global Select Scheme Performance since launch as at October 31 2006 (%) HSBC Super Trust Plus Scheme Interest Fund 1. 65 Guaranteed Fund 0. 4 Capital Preservation Fund 5. 78 Capital Preservation Fund Hong Kong Bond Fund 11. 37 International Bond Fund 23. 81 044028 Carrie Performance since launch as at October 31 2006 (%) 15 55

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme • Different Asset Portfolio • Manulife have more funds than HSBC 044028 Carrie 56

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme • Compare the conservative medium-risk fund Manulife Global Performance HSBC Super Select since launch Trust Plus Scheme as at October Scheme 31 2006 (%) Performance since launch as at October 31 2006 (%) Stable Fund 16. 75 Balanced Fund 32 North American -9. 15 Equity Fund Stable Growth Fund 30. 2 European Equity -3. 32 Fund International Equity Fund 044028 Carrie 8. 36 57

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme • Negative return in two Manulife funds – Significant loss in Asset Portfolio in North American and European • Difference in return – Manulife mainly hold bonds – HSBC hold nearly 50% in equtiy 044028 Carrie 58

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme • Compare the Aggressive high-risk fund Manulife Global Select Scheme Performance since launch as at October 31 2006 (%) HSBC Super Trust Plus Scheme Performance since launch as at October 31 2006 (%) Fidelity stable Growth Fund(Launch at Sept 1 2003) 35. 21 Asian Equity Fund 103. 8 Growth Fund 34. 22 European Equity Fund 26. 8 Hong Kong Equity Fund 39. 04 Growth Fund 32. 1 Japan Equity Fund 27. 92 Hang Seng Index Tracking Fund 41. 1 Pacific Asia Equity Fund 56. 34 Hong Kong Equity Fund 47. 2 Fidelity Growth Fund(Launch at Sept 1 2003) 59. 72 North American Equity Fund -15. 9 Aggressive Fund 33. 18 China Value Fund(Launch at Feb 1 2006) 21. 5 59

Manulife Global Select Scheme vs. HSBC Super Trust Plus Scheme • Negative return in HSBC funds – Significant loss in Asset Portfolio in North American • Significant return in HSBC Asian equity – Include in invest in China equity • Manulife provide a stable positive return 044028 Carrie 60

III. Comparison between the MPF Scheme of HSBC and Manulife • Conclusion – Manulife Global Select Scheme and HSBC Super Trust Plus MPF Scheme are similar. – Manulife have provided six more funds than HSBC – Manulife performance is on average 044028 Carrie 61

III. Comparison between the MPF Services of HSBC and Manulife • Compare these additional services of the Manulife and HSBC in the following aspects: – Hotlines – Website 044028 Carrie 62

III. Comparison between the MPF Services of HSBC and Manulife – Seminars – Newsletters – Regular benefit statements – Other Services 044028 Carrie 63

III. Comparison between the MPF Services of HSBC and Manulife • Compare these additional services of the Manulife and HSBC in the following aspects: – Manulife provides a wider range services – electronic services 044028 Carrie 64

IV. Comments on MPF services • The ultimate goal • ensuring people are adequately provided for upon reaching retirement age. 044028 Carrie 65

IV. Comments on MPF services • the choice of the MPF provider • Chose by employer • employee can only make the changes in the investment portfolio 044028 Carrie 66

IV. Comments on MPF services • MPF Scheme Authority – consider what purpose they want to be in the MPF Scheme 044028 Carrie 67

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Q&A 69