MPF members cautious in the midst of US elections

16 November 2020

Latest MPF fund flow data shows preference for defensive assets, reversing recent trends

  • Money Market and Guaranteed Funds topped MPF fund flow table in October
  • HK and China Equities saw the largest outflows
  • October saw a trend reversal from September
  • MPF remains above HK$1 trillion as MPF’s 20th anniversary approaches

Specialist independent MPF research group, MPF Ratings, today released their October MPF Asset Class Fund Flows Summary. At HK$1.03 trillion, MPF Ratings reaffirmed that total MPF assets are likely to remain above HK$1 trillion as MPF approaches its 20th anniversary in December but the major highlights of the report were the strong inflows into Money Market and Guaranteed Funds, and the reversal of Hong Kong and China equity flows, as the US election approached.

According to MPF Ratings, in the month of October MPF attracted an estimated HK$3.64bn in net inflows, with HK$2.60bn or 71.4%, going into Money Market and Guaranteed Funds, while -HK$960m or -26.4% of MPF flows exited Hong Kong and China equities. The outcomes placed Hong Kong and China equities at the bottom of the fund flow table for October and ranked Money Market Funds first, a reverse trend to the previous month (See Table 1).

Table 1: Comparison of 1-Month MPF Fund Flows between September 2020 and October 2020 (by Fund Types)

Source: MPF Ratings

The data appears to suggest MPF members are continuing to use MPF for short term speculation rather than long term retirement planning, and this concerns MPF Ratings’ Chairman, Francis Chung (叢川普) who observed, “Last month an estimated 93% of monthly net MPF inflows was invested in Hong Kong and China equities, one month later we see a -26.4% reversal. Conversely, September saw an approximately -40% of monthly flows exit Money Market funds, yet only one month later the trend reverses, and the asset class attracts approximately half of MPF’s October net inflows. MPF members are second guessing markets in the short term which in the long term may magnify the risk that members will fail to reach their retirement objectives.”

When asked what positive insights could be drawn from the latest fund flow data Mr Chung pointed to the ongoing success of the Default Investment Strategy (DIS) Fund options, commenting, “Inflows into DIS continue to be robust. All MPF schemes are obliged to offer Default Investment Strategy (DIS) Fund options, and for members, they offer a ready-made, low cost, well diversified retirement solution which takes away the burden and risk of chasing short term performance,” before audaciously stating, “MPF members can only control what is in their control. None of us have control over if or when Donald Trump will accept the US election result, but what we can control are our retirement objectives, and what is key to achieving those objectives is to remain invested, diversified and focused on the long term.”

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