Key Amendments
On 7 July 2026, the Mandatory Provident Fund Schemes Authority (MPFA) issued revisions to several of its Guidelines. Notably, the MPFA amended its Guidelines on Equities and Other Securities (Guidelines III.2) to expand eligible investments for Gold Exchange-Traded Funds (Gold ETFs) from a case-by-case approval basis to a categorical approval framework.
Before the revision of Guidelines III.2, MPF funds could only invest in Gold ETFs which were individually approved by the MPFA and expressly named in such Guidelines. Only two such Gold ETFs had received approval.
Under the revised Guidelines III.2, a Gold ETF is defined as “a passive investment vehicle which tracks the price of gold and holds physical gold as its major underlying assets”. MPF funds may invest in Gold ETFs, provided that they satisfy the following general criteria: (i) they are listed on the Stock Exchange of Hong Kong; (ii) they invest primarily in gold bullions; and (iii) they are not classified as derivative funds by the Securities and Futures Commission (SFC).
Investment in Gold ETFs is subject to a shared aggregate 10% investment cap with other permissible securities under section 8(2) of Schedule 1 to the General Regulation (e.g. fully-paid up shares listed on a non-approved stock exchange and authorized unit trusts and mutual funds) and such limit remains unchanged under the revised Guidelines III.2.
Consequential Amendments
Consequential amendments have also been made to the Guidelines on Default Investment Strategy (Guidelines III.14), alongside housekeeping updates to the Guidelines on Index-Tracking Collective Investment Schemes (Guidelines III.10).
Key Implications
This development provides greater flexibility in portfolio construction. Gold price movements have been historically independent of prices of stocks and bonds making it a useful tool for diversification. The new regulatory development provides asset managers with greater flexibility and offers access to a wider selection of Gold ETFs for the purpose of portfolio diversification.
The categorical approval of eligible Gold ETFs will bring benefits to Hong Kong’s ETF ecosystem, as it is expected to stimulate new demand for Gold ETFs that were previously ineligible. The regulatory change also aligns with the Government’s goal to propel Hong Kong into a regional gold reserve hub, alongside other initiatives to expand the gold storage capacity and develop gold central clearing facilities of the city.
For further information, please contact:
Ming Chiu Li, Partner, Deacons
mingchiu.li@deacons.com
