Hong Kong and China equity losses now impacting other MPF asset classes

5th February 2024

Deflationary concerns cast shadows over January MPF returns

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

Key points are as follows:

Hong Kong and China equity weakness sees the MPF system start 2024 with a loss of -2.06% (as measured by the MPFR All Fund Performance Index). (See Table 1)
In absolute dollar terms, MPF’s January investment loss is equivalent to -$23.5bn (or -$5,000 per MPF’s 4.69m members).
After contributions, total MPF assets end January at approximately $1.12tr (down $19.5bn for the month), equivalent to an average MPF account balance of $238,800 (down $4,200 for the month).
Notably, 2023’s 5 best performing MPF fund categories (US, Global, Japan, European Equity Funds and DIS Core Accumulation Fund) continued to outperform in January.
Hong Kong and China Equity Funds produced January’s worst performance, reporting a 1-month return of -9.21%, its 3rd worst January performance 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 today released MPF Ratings’ January MPF performance survey by highlighting the ongoing losses recorded by Hong Kong and China equities, strength of US equities, and the impact resulting from negative local equity performance on other MPF asset classes.

Quotes:

A January loss to start 2024 has historically been good for MPF members

“January saw MPF produce a -2.06% loss. While past performance is no indication of future results, on the 10 previous occasions MPF has produced a negative January result the annual result has been positive 70% of the time.”

What has caused MPF’s loss?

“Local equities were the biggest contributor to MPF’s January loss. Hong Kong and China equities fell -9.21% as deflationary concerns hit Mainland investor sentiment impacting MPF members and putting Hong Kong’s local equity fund managers on notice.”

The ripple effect created by Hong Kong and China’s equity losses

“Hong Kong and China equity losses didn’t just affect local equity funds. The impact was more far reaching, affecting other funds with Hong Kong and Chinese equity investments, particularly MPF’s traditional Mixed Asset Funds which all recorded losses in January.”

DIS once again proves resilient as MPF’s traditional Mixed Asset Funds record losses

“While traditional Mixed Asset Funds recorded losses to start 2024, the MPFA’s mandated DIS Core Accumulation Fund was once again resilient, producing a positive return owing to its relatively lower Hong Kong and China equity exposure and higher US allocation. The impact of this allocation difference can be seen from the 10.8% return difference between Hong Kong and China equities and US equities in January, the widest January variance since MPF’s launch.”

Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 31st January 2024)