26th May 2021
MPF members chasing equity markets are the biggest losers
Key points are as follows:
- The MPF system is expected to produce an estimated investment loss of -$5.664bn in May, an equivalent average investment loss of -$1,270 per member. Total MPF assets are expected to fall to $1.196tr.
- End of May average MPF member account balances are estimated to be around $268,220.
- The estimated average return of MPF funds for May is -0.37%.
- Asian Equities, Hong Kong and China Equities, and US equities are amongst the worst performing asset classes in the month of May (See Table 1).
- May’s equity performance downturn follows strong equity MPF inflows in April (Also see Table 1).
Francis Chung (叢川普), Chairman of Hong Kong’s specialist independent MPF research group, MPF Ratings, today reported that MPF is on track for monthly losses in May. At the time of writing MPF Ratings stated that based on current market conditions the MPF system was expected to produce an estimated loss of -$5.664bn, the equivalent of -$1,270 per member, leaving average MPF account balances at $268,220. Mr Chung also suggested that if MPF members showed better investment discipline as equity market volatility re-emerged then they may not have lost as much money.
Focusing on investment discipline
“In April US, Asian, and HK and China equities collectively received 76% of MPF’s net fund inflows (See Table 2). MPF members who bought equities in April did so at the top of the market. Had they remained diversified and focused on the long term, rather than chase market returns, their losses so far in May would be modest. By way of example, the well diversified DIS Core Accumulation Fund is only down -0.05% month to date compared to an average loss of -1.42% between US, Asia and local equities.”
Disappointing performance is due to member decisions not the MPF system
”The MPF system is often criticized for its failure to produce good returns, but investment returns are not a system issue. Within the MPF system members choose their own investments. As long as members aggressively try to time markets and do so at the wrong time, they will not only produce disappointing returns, but they also expose themselves to losses. Members need to understand it is diversification, and “time in market” not “market timing”, which produces long term consistent returns.”
Table 1: MPF month-to-date average investment returns by asset class (as at 21 May 2021)
Source: MPF Ratings
Table 2: 1-month MPF asset class net inflows (as at 30 April 2021)
Source: MPF Ratings