MPF members shun Hong Kong and China equities over ongoing political concerns

17 June 2020

US equities win big as MPF investor attitudes change

Concerns over China’s political motivations together with the ongoing impact of COVID-19 saw MPF members leave Hong Kong and China equities in record numbers.

MPF members took aggressive action in May (See Table 1) as Hong Kong and China equities recorded the largest monthly net funds outflow within MPF.  Conversely, regional equity funds (excluding Asia) recorded the highest MPF net inflow levels, gaining HK$1.17bn in net assets, with over 80% of the inflows moving into US equities, as Sino-US tensions continue to simmer.

Table 1: Market Shares of MPF Assets and 1-Month Fund Flows as of 31 May 2020 (by Fund Types)

Source: MPF Ratings

According to Francis Chung (叢川普), Chairman of MPF Ratings, a leading independent provider of MPF research, the scale of the MPF net inflow variation could signal a change in MPF member investment behaviour.  “While superficially it may appear the strong net flows into US equities may be linked to the US share market recovery, the magnitude of the fund flow difference between Hong Kong and China, and the US would suggest something more significant is occurring. US and European equities ordinarily accounts for just over 4% of MPF assets. To receive almost 6 times their market share as net inflows is both disproportionate and irregular compared to history. There appears to be a loss of confidence in Hong Kong and China equities amongst MPF members.”

When asked if he believed the changing investor behaviour would lead to better investment outcomes, Mr Chung was blunt in his assessment, “On so many levels, the past 12 months have been incredibly difficult for the people of Hong Kong, but MPF is long-term so members should focus on their retirement objectives rather than time markets. The key to long term wealth creation is to stay well diversified, top up investments in falling markets and remain truly long term focus. If that sounds simple, that’s because it is; if you’re a truly long term investor.”

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