Hang Seng Index impacts MPF members

5 November 2020

MPF members lose $26,000 despite strong October returns

Hong Kong and China equity was the best performing MPF asset class in October with a monthly return of 3.28% (See Table 1), but as MPF assets grow to record levels, the disappointing performance of Hong Kong’s stock market benchmark, the Hang Seng Index (HSI), is negatively impacting MPF members’ account balances. That’s according to leading independent MPF research group MPF Ratings’ as they published their latest monthly MPF Performance Survey.

MPF Ratings estimates that while MPF total assets have grown to a record $1.03 trillion, Hong Kong’s stock market benchmark, the HSI Total Return Index, is down -11.82% year-to-date (also see Table 1), translating to not only a loss of -$26,260 for MPF members who are fully invested in funds which track the HSI, but also compares unfavourably to the broader MPF industry, where the average gain in 2020 is an estimated $3,570.

Table 1: 1-month and Year-to-date performance of MPFR Indices and HSI Total Return Index as at 31 October 2020

Source: MPF Ratings

With the HSI’s underperformance in the spotlight, MPF Ratings’ Chairman, Francis Chung (叢川普) offered the following insight, “MPF members may find index investing attractive because it’s perceived to be low cost, but the HSI is focused on one market, and being so heavily skewed to financial and property companies too, one misses out on the benefits of diversification, which is key to long term wealth creation.” 

When asked to put the importance of diversification into context for MPF members, Mr Chung shared his personal approach to investing. “Time and diversification are investors’ best friends.  Time in market, not market timing, is as critical to long term wealth creation as not having all of one’s eggs in one basket. Diversification and staying invested improves MPF members’ chances of achieving their retirement goals and helps one sleep better at night. I personally would not sleep well knowing I’d lost -11.82% of my retirement money in 10 months, and I certainly wouldn’t achieve my retirement goals.”

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