MPFA’s eMPF and sustainable investment ambitions provide solace from May’s market losses

26th May 2022

Key points are as follows:

  • May’s estimated MPF accumulated year-to-date loss is approximately -$157bn resulting from a 5thconsecutive monthly asset value decline.
  • May’s average MPF member loss expected to exceed -$5,900 and -$34,200 YTD.
  • Average MPF member account balance is forecasted to fall to $228,500, a decline of -$40,400 from its peak in June 2021 ($268,900), and total MPF assets are expected to end May at approximately $1.048tr.
  • Equities lead all MPF assets into loss.
  • MPFA’s commitment to lower fees and sustainable investing may offer MPF members some protection from a de-rating of equity and bond markets.

MPF Ratings, Hong Kong’s specialist independent MPF research group is expecting an estimated loss of -$27bn in May to bring MPF’s accumulated 2022 loss to around -$157bn.  Francis Chung (叢川普), MPF Ratings’ Chairman, noted that while traditional financial asset returns may struggle in periods of rising inflation and interest rates,PFA’s commitment to eMPF and sustainable investing may offer members some protection from a market de-rating.

Quotes:

MPF’s history suggests we are at or near a market bottom

“Notwithstanding MPF’s forecasted YTD loss through May is the worst start to a calendar year since its inception, historically when losses exceed -10%, it has coincided with a rebound in market returns.” (See Chart 1)

How can lower fees and sustainable investing protect members from falling values in traditional assets?

“Not only have companies with good Environmental, Social and Governance (ESG) credentials historically outperformed, but ESG focused asset classes have also historically been lowly correlated with traditional assets such as equities and bonds, so blend well to create better diversified portfolios. The MPFA’s commitment to ESG, through its recently announced sustainable investment principles, opens MPF to new products and services, which together with lower fees, driven by the MPFA’s eMPF initiative, should deliver better long term, after fees, risk adjusted returns.”

What should MPF member do?

“Time in markets, not market timing, is the key to unlocking long term wealth creation. Falling markets can offer good opportunities to invest in quality assets at lower prices. Members should also remain invested and diversified to maximise the compounding effect that sees wealth grow exponentially over their working life.”

Table 1: MPF fund average investment returns by asset class (as of 23rd May 2022)

Source: MPF Ratings

Chart 1: Cumulative Performance of MPFR All Fund Performance Index since MPF inception and after losses exceeding -10%

Source: MPF Ratings

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