US debt puts ceiling on MPF’s May investment returns

25th May 2023

While investors watch the US, Japan’s TOPIX performance offers MPF members an important lesson

Key points are as follows:

  • The MPF system is expected to record its 3rd monthly loss in 2023 with the Average investment loss (as at 22nd of May) expected to be -0.51% (as measured by the MPFR All Fund Performance Index).
  • In absolute dollar terms May’s investment loss is estimated to total -$21.9bn or -$4,700 per MPF’s 4.69m members reducing year-to-date investment gains to $2,800 per member.
  • Total MPF assets are presently forecasted to end May 2023 at approximately $1.088tr, or an average account balance of $231,900 (down -$3,800 from the previous month but up $7,900 year-to-date after factoring in contributions) per MPF’s 4.69m members.
  • HK & China Equity Funds, MPF’s largest asset class with 22% market share, continues to be the major asset class performance laggard and is expected to record its 3rd month of negative performance in 2023.

Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent provider of MPF research, views and education today announced MPF Ratings’ May forecasted returns by pointing out that while investors speculate over the US debt ceiling situation, lessons can be learned from Japan which saw the TOPIX index reach its highest level since 1990. Taking into consideration a forecasted May investment loss of 0.51% and after factoring in contributions, MPF is expected to end May at approximately $1.088tr in size, or the average equivalent of $231,900 per MPF’s 4.69m members.


May losses highlight the need for direction as markets assess the US debt ceiling outcome

“May appears to be on track to produce a loss for MPF members as investors speculate on the outcome of US debt ceiling negotiations while dealing with uncertainties over inflation and interest rates. Investors are looking for direction from the market.”

Japan’s TOPIX index reaching highest level since 1990 offers important lesson for MPF members

“While debt ceiling uncertainties cast a shadow over markets, May saw Japan’s TOPIX index reach its highest level since 1990. This milestone offers MPF members an important lesson. While equities are recommended for long-term investors they can go through extended periods of underperformance. In the case of Japanese equities 33 years, serving to highlight the importance of portfolio diversification.”

What should MPF members do?

“Diversification is paramount and choosing asset classes which outperform consistently over time is difficult. Fortunately, every MPF scheme offers members Default Investment Strategy (DIS) funds. They’re low fee ready-made diversified fund options and take away the challenge of selecting individual funds. They are a sensible long-term option for most MPF members to consider.”

Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 22nd May 2023)

Source: MPF Ratings

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