There are growing concerns in the market that Hong Kong's MPF funds may be forced to offload large amounts of US Treasuries after Moody's downgraded the US sovereign credit rating.

Currently, only Japan's R&I still gives the US the highest rating, allowing MPF funds to continue investing more than 10% of their total assets in US Treasuries. If the US loses this last top rating, MPF funds will be compelled to sell any US Treasuries holdings that exceed the cap.

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Foreign media reported earlier that the Hong Kong Investment Funds Association had suggested to the Mandatory Provident Fund Schemes Authority (MPFA) that US Treasuries should be given special treatment. It is understood that the MPFA has recently reached out to MPF trustees to assess the potential impact if the US no longer meets the definition of an "exempt authority" due to changes in its credit rating, and has asked trustees to put contingency plans in place.

In response to Hong Kong media inquiries, the MPFA stated that it has no plans to amend the MPF fund investment requirements. The MPFA has lately reminded trustees again to develop appropriate strategies and mitigation measures to address possible changes in the US credit rating.