23rd December 2021
Record local equity losses to send MPF spiraling to a 1st loss in 3 years
Key points are as follows:
- MPF is expected to produce a December investment loss of -$10.06bn to take MPF’s collective annual investment loss to a forecasted -$24.85bn, equivalent to an average annual loss of -$5,400 for MPF’s 4.5m members.
- After factoring in expected losses and MPF contributions, total MPF assets are expected to end 2021 at $1.160tr (approximate account balance of $255,000 per MPF member) down from a peak of $1.221tr achieved in June 2021 (approximate account balance of $269,000 per MPF member)
- Hong Kong and China equities is on track to produce its widest relative annual underperformance to US equities since MPF’s inception. The forecasted underperformance is approximately -36% (See Chart 1).
MPF Ratings, Hong Kong’s specialist independent MPF research group today announced it is expecting the MPF system to deliver its first annual loss in 3 years, a result stemming from record relative losses in Hong Kong and China equities. After factoring in MPF contributions, total assets are expected to end of 2021 at approximately $1.160tr (or the equivalent of approximately $255,000 per member) down from a peak of $1.221tr achieved in June 2021.
When announcing MPF Ratings’ forecasted MPF December returns Francis Chung (叢川普), MPF Ratings’ Chairman, highlighted Hong Kong and China equities’ relative underperformance to US equities as the primary reason why MPF’s 4.5m members will see losses in their MPF accounts for the first time in 3 years.
30 cents out of every Hong Kong dollar makes Hong Kong and China equities the most critical asset class within the MPF system
“With almost 23% market share Hong Kong and Mainland equity is not only the largest single MPF asset class, but when one factors in money invested through MPF’s mixed asset funds and the MPFA mandated Default Investment Strategy (DIS) funds, we estimate that approximately 30 cents out of every dollar invested in MPF enters the local equity market, making it the most critical asset class within the MPF system.”
Record Hong Kong/China and US equities return difference hurts MPF members
“We expect to see the relative performance difference between Hong Kong/China equities and US to be approximately -36% at the end of 2021. Not only will this be an all-time record difference, but with US equities producing over 20% annually and local equities expecting an annual loss of over -15%, many members, in particular those who have not diversified their MPF portfolio, will be disappointed by the performance of local markets in 2021.”
Table 1: MPF fund average investment returns by asset class (as of 20th December 2021)
Source: MPF Ratings
Chart 1: Calendar year relative performance of HK & China Equity Funds vs US Equity Funds since MPF’s inception
Source: MPF Ratings
* Relative performance > 0% if HK & China Equity Funds outperformed US Equity Funds. Relative performance < 0% if HK & China Equity Funds underperformed US Equity Funds