8.9% US equity return reinforces critical MPF lesson

3rd August 2022

Key points are as follows:

  • MPF’s Equity Fund (US) category produces best monthly returns since November 2020.
  • Supported by a rebound in European and US equities MPF records only a modest investment loss of -0.10% (as measured by the MPFR All Fund Performance Index) or approximately -$1.1bn (or -$200 per MPF’s 4.59m MPF members) in July.
  • Positively, after factoring in MPF contributions, July’s average MPF member account balance is approximately $231,400, an increase of $600 over the month and 14% below a peak of $268,900 achieved in June 2021.
  • Total MPF assets ended the month of July at approximately $1.061tr, an increase of $2.9bn from the previous month, but down from a peak asset level of $1.221tr reached in June 2021.
  • Variance between July’s US and HK/China equity monthly return was the widest monthly difference since MPF’s launch and highlights the need for diversification.

US equities produced its best monthly result since November 2020, but according to Francis Chung (叢川普), Chairman of MPF Ratings, Hong Kong’s specialist independent MPF research group, the result reinforces a critical MPF lesson, the importance of diversification.


Major US equity indices produce their best monthly result since 2020

“Despite ongoing concerns over interest rates, inflation and recession, a combination of strong earnings and more attractive valuations helped drive US equity markets in July. So strong was July that the Nasdaq was up 12%, helping it recover about 1/3rd of its first half loss 2022, while the other major indices, the Dow Jones and S&P reduced their year-to-date losses to -10% and -13% respectively.”

Variance between HK/China and US equities highlights the importance of diversification

“Not all MPF members benefited from the rally in US equities in July. HK/China equity investors saw both relative and absolute losses. Over the month, the difference between US equities and HK/China equities was 16.51%, the widest monthly margin since MPF’s launch.”

What should MPF members do?

“The difference between HK/China and US equity performance highlights a crucial point which both MPF Ratings and the MPFA have been emphasizing. Diversification is essential. Markets go up and down, and do so at different times. Diversification smooths out such volatility. The MPFA’s Default Investment Strategy (DIS) Funds are low fee ready made diversified fund options with good exposure to asset classes such as US equities. For many MPF members DIS is an excellent option to consider.”

Table 1: 1-month and year-to-date MPFR Index returns as at 31 July 2022

Source: MPF Ratings

Table 2: 10 best performing MPF constituent funds for the month of July 2022

Source: MPF Ratings

Table 3: 10 worst performing MPF constituent funds for the month of July 2022

Source: MPF Ratings
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