Market losses compounded by MPF members chasing returns

2023年11月3日

Outlook for the rest of 2023 and what MPF members should do

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

Key points are as follows:

The MPF system saw an October investment loss of approximately -2.56% (as measured by the MPFR All Fund Performance Index) to take MPF’s year-to-date investment loss to -2.72% (See Table 1).
By dollar value the investment loss was approximately -$27.8bn (or -$5,900 per MPF’s 4.69m members) to take year-to-date investment losses to -$30.8bn, (the equivalent of -$6,600 per member).
Factoring in contributions MPF Ratings expects total MPF assets at the end of October at approximately $1.064tr, the equivalent of an average MPF account balance of $226,600 (down -$5,100 for October but up $2,700 year-to-date).
Disappointing results from US equity markets will especially hurt MPF members as they poured HK$4.66bn, equivalent to 42% of MPF’s net inflows into US equities last quarter.
6 negative months of performance out of 2023’s first 10 months proceeding 9 out of the first 10 months in 2022 suggests markets are closer to their bottom than their top.

Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent provider of MPF research, views and education today shared his concerns that MPF members appear to be “chasing markets” as he released MPF Ratings’ October MPF performance survey.

Mr Chung cited recent fund flow data which showed that an overwhelming portion of MPF contributions went into US equities in Q3, just as the US market delivered a 3rd successive month of negative returns culminating with a -2.39 loss in October.

With only two months of the calendar year remaining, October saw MPF produce a 6th monthly loss. October’s -$27.8bn loss takes MPF’s accumulated year-to-date investment loss to -$30.8bn, or approximately -$6,600 per MPF’s 4.69m members, and after factoring in contributions MPF total assets ended October at approximately $1.064tr or an average of $226,600 for each of MPF’s 4.69m members.

Quotes:

Concern that MPF members are “chasing returns” as US equities records its 3rd consecutive monthly loss in October

“For most of 2023 US equities has outperformed Hong Kong and China encouraging MPF members to pour $4.66bn into US funds last quarter, the equivalent of approximately 42% of MPF’s total Q3 net inflows. The staggering amount suggests MPF members are ‘chasing returns’ short term rather than investing long term. Disappointingly for those members, US equities produced its 3rd consecutive monthly loss in October.”

Re-allocation is a reminder investment performance is not in the MPF systems’ direct control

“The decision by MPF members to re-allocate to US equities serves as a reminder that investment performance is not controlled by the MPF system. Members make their own decision and the system facilitates the transactions but importantly does so with absolute security. Members can be assured their MPF retirement savings are secure because security is in the system’s control.”

“I urge MPF members….” – outlook and what to do?

“Economic, political and geo-political uncertainties have been a 2023 constant and this is unlikely to change in the immediate future. Navigating such conditions is treacherous particularly for non-professional investors. I urge MPF members to seek professional advice and to invest for diversity and longevity, while taking advantage of ‘dollar cost averaging’ by topping up if markets continue to fall. Default Investment Strategy (DIS) funds are available through all MPF schemes and offer members a ready-made low fee diversified investment solution. For most MPF members they are ideal funds to help meet their long term retirement needs.”

Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 31st October 2023)