Limelight on MPF as major equity markets take centre stage

5th July 2023

Strong June sees $60.5bn added to MPF accounts but could it have been more?

MPF Ratings’ June MPF Performance Survey has now been uploaded.

Key points are as follows:

The MPF system produced an average June investment gain of 2.77% (as measured by the MPFR All Fund Performance Index), contributing to a Q2 loss of -0.95% and a 2023 first half investment gain of 3.07%.
In absolute dollar terms June’s investment gain was $29.8bn (or $6,400 per MPF’s 4.69m members), contributing to a six-month investment gain of $32.2bn, the equivalent of $6,900 per member.
After factoring in investment gains and contributions, total MPF assets end June 2023 at approximately $1.112tr (up $60.5bn since beginning of 2023), or an average MPF account balance of $236,800 (up $7,200 from the previous month and up $12,900 year-to-date).
US Equities was MPF’s best performing asset class across 1 month, 3 months and year-to-date.
Despite a June performance rebound, HK & China Equity Fund ends the first half of 2023 as MPF’s worst performing asset class. Additionally, a -20.5% year-to-date return difference between US Equity and HK & China Equity Funds is the worst variance since MPF’s launch.

Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent provider of MPF research, views and education released MPF Ratings’ June MPF performance survey by pointing out MPF DIS Core Accumulation Fund’s outstanding performance and that $60.5bn was added to MPF accounts in the first half of 2023 before questioning whether more could have been added to MPF member accounts?

Quotes:

First half 2023 results

“On the back of strong performances from the DIS fund category and major offshore equity markets $60.5bn was added to the MPF system in the first half of 2023. For MPF’s 4.69m members this is an average increase of approximately $12,900 and takes the average individual MPF member account balance to $236,800. While a pleasing result, it could have been better had local equities been able to maintain its early 2023 momentum. A disappointing 2nd quarter saw Hong Kong and China equities end 2023’s first half as the MPF system’s worst performing asset class.”

Why was HK & China equities MPF’s investment laggard during the first half of 2023?

“With a 21% market share HK & China equities is MPF’s largest asset class. 2023 began with Mainland economic optimism but this has given way to concerns of slowing economic growth.”

DIS Core Accumulation Fund and consistent performance – “It will never be the best performer but it will also never be the worst”

“HK & China equities’ underperformance highlights the difficulties between choosing the ‘best’ performing asset class and the importance of diversification. Default Investment Strategy (DIS) (Core Accumulation Fund) continues to produce consistent MPF member results. It will never be the best performer but it will also never be the worst. Offered by every MPF scheme, DIS funds are 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 30th June 2023)