Tensions between China and the US sees MPF members lose money for the first time in 5 months

30 March 2021

But despite losses in March MPF account balances are expected to rise for a 4th consecutive quarter

Key points are as follows:

  • Average MPF member account balances are forecasted at around $258,700 in March, losing approximately $4,327 from February and recording a fall for the first time for 5 months.
  • MPF system is expected to show an accumulated investment loss of -$19.294bn, reducing total MPF assets to an expected $1.15tr in size.
  • Despite the decline in March, MPF account balances are expected to rise by $3,216 over the first quarter of 2021, a 4th consecutive quarter of rising account balances.
  • Worst performing asset class in March is the Equity Fund (HK & China) category with an expected of decline -5.33% (see Table 1).  The biggest fall in one year.
  • Worst performing asset class in quarter 1 is the Bond Fund category with an estimated quarterly loss of -2.68% (also see Table 1).  The biggest quarterly loss in over 4 years (since Q4 2016).

MPF members are set to lose money for the first time in 5 months as a rout in Chinese technology companies and ongoing tensions between Washington and Beijing threaten to impact Chinese companies listed on Wall Street.

With this backdrop leading independent Mandatory Provident Fund (MPF) research specialist, MPF Ratings Ltd, is expecting average MPF account balances for Hong Kong’s 4.46m MPF members will decline $4,327 in the month of March translating to an average account balance of approximately $258,700.  While the decline marks the first monthly fall in 5 months, on a quarterly basis account balances are expected to be up $3,216, a 4th consecutive rise in MPF account balances.

According to MPF Ratings the worst performing asset class in March is the Hong Kong and China equity fund category, with an expected of decline -5.33% while over the first three months of 2021 bond funds are expected to generate a loss of approximately -2.68%, their worst performance in over four years (since quarter 4 2016), highlighting the ongoing concerns over rising US Treasury rates, equity valuations and inflation.

While members will be disappointed to see a fall in MPF account balances, MPF Ratings’ Chairman Mr Francis Chung (叢川普) did see a positive side of markets momentarily pausing stating, “MPF accounts have risen for four consecutive quarters so to see one month of negative returns should not be a surprise.   An estimated average MPF account balance of $258,700 is still the 3rd highest level on record.”  While pointing out positives, Mr Chung did however urge MPF members to continue to exercise caution, “Concerns over rising US bond yields still poses a risk, signaling inflation and equity valuation concerns, and with tensions between the Mainland and the United States returning there is possibly another factor which will negatively impact markets. For MPF members diversification and a long term investment focus continue to be critical.”

Table 1: Forecasted average investment returns by MPF asset class for March 2021

Source: MPF Ratings

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