25th January 2024
January has historically produced an interesting performance anomaly
Key points are as follows:
- The MPF system is expected to start 2024 on the back foot with an estimated January average investment loss of approximately -3.06% (as measured by the MPFR All Fund Performance Index as at 22nd of January). (See Table 1)
- In absolute dollar terms, an estimated -3.06% loss would be equivalent to approximately -$18.6bn (or -$4,000 per MPF’s 4.69m members).
- January’s expected negative result is largely attributed to ongoing HK & China Equity Fund performance pressures with MPF’s largest fund category presently on track to deliver an investment loss of -11.60% (as measured by the MPFR Equity Fund (HK & China) Index as at 22nd of January). (Also see Table 1)
- After factoring in contributions, total MPF assets are presently forecasted to end January at approximately $1.13tr (down -$14.6bn from end of December), equivalent to an average MPF account balance of $239,900 (down -$3,100 from end of December).
- Historically, a negative January start has been positive for annual MPF returns. Out of the 10 years when January saw negative MPF returns its calendar year return was positive in 7.
Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent provider of MPF research, views and education today pointed to ongoing performance headwinds from MPF’s largest fund category, Hong Kong and China equities, as the primary reason why he expects the MPF system to record a negative return to begin 2024.
Mr Chung has foreshadowed a negative result of approximately -3.06% for January, the equivalent of approximately -$18.6bn and representing a loss of about -$4,000 per MPF’s 4.69m members. While a negative return puts the MPF system immediately on the “back foot”, history has shown January to produce an interesting fact and performance anomaly which some MPF members may welcome. Since MPF’s launch, a negative January has been recorded 10 times, and 7 of those then resulted in a positive full year return.
Quotes:
What is the key driver for MPF’s expected negative start to 2024?
“Hong Kong and China equity performance pressure continues to affect MPF’s overall performance. MPF’s largest asset class is on track to record an investment loss of around -11.60% for January. There is however optimism that the system may recover some of losses in the near term with news that Mainland policymakers are considering measures to stabilize its struggling equity market.”
A January loss has historically resulted in a positive annual return
“While past performance is no indication of future results, January has historically produced an interesting performance anomaly. MPF has produced a negative January result 10 times, but in what should be good news for members 7 of those resulted in a positive full year return.”
“Another solid US reporting season is a feature of 2024’s start. The narrative of lower inflation and interest rates also remains unchanged which is a positive environment for fixed income and attractively valued quality equities, but with most MPF investors allocated to Hong Kong and China equities, local market performance will still be key to MPF’s overall performance outcome in 2024.”
Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 22nd January 2024)
Source: MPF Ratings
