Significant bond losses and return differences headline March MPF returns

8 April 2021

US equities outperforms local shares by its biggest margin in almost 6 years

MPF Ratings’ March MPF Performance Survey has now been uploaded.

Key points are as follows:

  • Average MPF member account balances now stand at a forecasted $261,300, losing approximately -$1,716 per member in March to record a fall for the first time for 5 months.
  • MPF system is expected to show an accumulated investment loss of -$7.654bn in March reducing total MPF assets to an expected $1.165tr in size.
  • US equities outperformed Hong Kong China equities by 7.90% in March (see Table 1). This is the largest US outperformance (as measured by the difference between MPF Ratings’ MPFR Equity Fund (HK & China) Index (March decline of -3.74%) and the MPFR Equity Fund (US) Index (March increase of 4.16%)) relative to local equities in almost 6 years.
  • Bonds produced their worst loss in over 4 years as MPF Ratings’ MPFR Bond Fund Index recorded a quarterly loss of -3.38% (also see Table 1). 
  • The best performing MPF constituent fund in March was AIA MPF – Prime Value Choice’s North American Equity Fund.

Francis Chung (叢川普), Chairman of Hong Kong’s specialist independent MPF research group, MPF Ratings noted when releasing MPF Ratings’ March MPF Performance Survey, that bonds experienced their largest quarterly loss in over 4 years while US equities outperformed local shares by its biggest margin in almost 6 years as MPF recorded its first monthly loss in 5 months. Mr Chung noted these two extremes demonstrated the need for MPF members to be increasingly vigilant in the short term and the importance of diversification in the long term.

On the record magnitude of bond losses and performance differential between US, and HK and China equities

“A fall in MPF account balances for the first time in 5 months should not come as a surprise, however, the magnitude of losses recorded by bond investors and the performance variation between US equities, and HK and China equities are too significant for MPF members to ignore.  People assume bonds are relatively conservative, so for bonds to record an equity like loss of -3.38%* over three months, and to see the biggest monthly outperformance of US shares over HK and Chinese shares in almost 6 years** highlights how unexpected market performance can be in the short term.”

* as measured by the MPFR Bond Fund Index
** 7.90%, as measured by the difference between MPFR’s Equity Fund (US) and MPFR Equity Fund (HK & China) indices

The importance of diversification

 “The sharp sell-off in bonds and an almost 8% difference in performance between US, and HK and China equities is not only almost unheard of, but difficult to predict. MPF members can, and need to, protect themselves from being on the wrong side of these trades by ensuring they are well diversified and focused on long term investing.”

Table 1: 1-month and quarterly MPFR Index returns as at 31 March 2021

Source: MPF Ratings

Table 2: 10 best performing MPF constituent funds for March 2021

Source: MPF Ratings

Table 3: 10 best performing MPF constituent funds in Quarter 1, 2021

Source: MPF Ratings

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