26th October 2022
Local equity performance is MPF’s key wealth factor
Key points are as follows:
- MPF’s October estimated aggregate investment loss at the time of writing is approximately -$27bn (or -$5,900 per MPF’s 4.57m MPF members) taking the system’s estimated year-to-date loss to approximately -$286bn, or -$62,400 per MPF member.
- After factoring in MPF contributions, October average MPF member account balances are expected to fall to $206,000, a monthly decrease of $5,000, and $51,700 for the year.
- Assuming markets remain flat in October’s final week, total MPF assets are expected to end the month at approximately $942bn, a level last seen in May 2020 when MPF assets were at $927.5bn.
- Significant ongoing falls from MPF’s largest asset class, Hong Kong/China equities, is the main contributor to MPF’s declining market size.
- Hong Kong equities are now at 2009 levels. This 13 year low has MPF on track to possibly record its worst annual performance since 2008 when the system, as measured by the MPFR All Fund Performance Index, recorded a loss of -27.35%.
Hong Kong equity’s recent market sell off has exacerbated losses in the MPF system with MPF Ratings, Hong Kong’s independent provider of MPF research, views and opinions, estimating that October MPF losses will total $27bn, taking 2022 accumulated losses to $286bn, and putting MPF on track to record its worst annual performance since 2008.
Francis Chung (叢川普), Chairman of MPF Ratings, Hong Kong’s specialist independent MPF research group, struck a cautious tone as he made the point that while falls in financial markets were not a function of the MPF system, which remains robust and secure, the impact of local equity losses for MPF members cannot be understated.
Why one cannot underestimate the impact of Hong Kong equity losses on MPF members
“Hong Kong and China equities is MPF’s single largest asset class. Approximately 21% of MPF member money is invested in local shares so any sell-off has a material effect on retirement wealth held in the MPF system.”
MPF Ratings reiterates that MPF is a highly secure and robust system
“It is important to emphasize that while average MPF member account balances are down approximately 20% for the year at approximately $206,000, the accrued market losses are not a direct result of the MPF system. The system does not control investment gains and losses rather it safeguards member assets operationally. MPF members can take confidence in the system’s highly robust and highly secure environment.”
What should MPF member do?
“Wealth is relative, not absolute. It is imperative that MPF members diversify and invest for the long term. In falling markets, losing less than others is winning. MPF Ratings reiterates that every MPF scheme offers Default Investment Strategy (DIS) funds. They’re low fee ready-made diversified fund options. For the vast number of MPF members DIS remains an excellent option to consider.”
Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 24th October 2022)
Source: MPF Ratings