Despite US-China tensions MPF members pile into US and HK/China equities

11 September 2020

1 out of every 2 dollars went into US and HK/China equities according to latest MPF fund flow data

US and Hong Kong/China equities were the biggest winners in August according to the latest MPF asset and fund flow data released by MPF Ratings Ltd, an independent provider of MPF industry research.

According to the report MPF attracted $4,462m in net inflows for August, and in a strong indication that MPF members were becoming more confident in equity markets, almost 1 out of every 2 net contributions were invested in US and Hong Kong/China equities, while total MPF assets continued to exceed the $1 trillion level, a milestone first reached in July.

While confidence returning to equities is good news, the latest fund flow data also suggests that members continue to second guess markets, which according to Francis Chung (叢川普), MPF Ratings’ Chairman, may indicate further volatile swings in forthcoming months.

“In the month of August, 46% of MPF net inflows were invested in US and Hong Kong/China equities (See Table 1). This may be a positive indicator for equity market confidence, however only one month earlier, the opposite occurred with 40% of net inflows invested in two of the most conservative options available to MPF members, Bonds and Money Market funds (See Chart 1). After a year of volatile markets and an uncertain economic landscape, attempting to time markets has become an even riskier approach to wealth creation.”

Table 1: Industry Share of MPF Assets as of 31 August 2020 and MPF Fund Flows for August (by Fund Types)

Source: MPF Ratings

Chart 1: Industry Share of 1-Month Net Inflows for July and August 2020

Source: MPF Ratings

When asked what he thought would be most prudent in uncertain times, Mr Chung offered the following, “Stay long term focused and diversify with a mix of assets.  The asset mix should depend on members’ investment time horizon and risk appetite.  The MPFA mandated Default Investment Strategy (DIS) Fund options, which are well diversified and low cost, should suit most MPF members’ needs while taking away the stress of guessing market movements.”

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