The Mandatory Provident Fund market is likely to see more mergers as smaller companies struggle to compete
ENOCH.YIU@SCMP.COM
PUBLISHED : Monday, 09 November, 2015, 2:04pm
UPDATED : Monday, 09 November, 2015, 2:20pm
Retirement issues have come to the forefront in China where the government recently eased family planning restrictions in an effort to boost population growth and consumption. Photo: Reuters
The Mandatory Provident Fund market is likely to see more mergers as smaller companies struggle to compete with the giant players in the market.
The latest Gadbury Group MPF market share report shows large companies dominate the rankings, as they embrace the idea that growth through acquisition can bring long term benefits.
A prime example, US financial firm Principal has risen to the No. 5 spot with a 6.3 per cent market share after its acquisitions of AXA’s MPF business is completed in September. Before the deal, Principal stood in eighth and AXA at tenth, each with a nearly 3 per cent market share.
The merger helped Principal to leapfrog ahead of what were bigger competitors, including Bank Consortium Trust in the No. 6 spot, Sun Life in No. 7, and Fidelity at No. 8.
The 19 MPF providers collective manage HK$561 billion on behalf of 2.5 million employees.
Another merger is underway. Standard Chartered in September said it was selling its MPF and other pension business to insurer Manulife Financial. This deal will have little impact to the ranking table because Manulife is already the second biggest provider with a 19.1 per cent market share. The top spot is dominated by HSBC and its subsidiary Hang Seng Bank, which have a combined 29.3 per cent share of the market.
Given the huge differences in scale between the providers, it is reasonable to assume that some of the smallest ones will sell their MPF business to the biggest players sooner or later.
AIA, the third largest MPF player, now has a market shares of 9.7 per cent, while the fourth one BOCI-Prudential has a 7.7 per cent share. The top two players HSBC and Manulife have almost half of the market, while the top seven have an 83 per cent share, according to the Gadburg report.
In contrast, the eight smallest MPF providers have a combined market share of about 3 per cent.
The smallest players Haitong only has a share of 0.071 per cent, or HK$399 million under management, while AMTD has a share of 0.08 per cent and HK$448 million under management. Schroder has a 0.22 per cent market and HK$1.24 billion under management.
http://m.scmp.com/business/article/1877008/heres-why-more-consolidation-likely-among-mpf-providers
