25th October 2024
MPF returns pause in October but the system is expected to finish the year on a high
Key points are as follows:
- After recording all-time MPF total asset and average account sizes in September, the system is set to draw breath and is currently on track to record an October loss. MPF Ratings’ MPFR All Fund Performance Index (as at 22nd of October) shows an estimated -1.56% month-to-date fall however year-to-date gains remain strongly positive, up 11.01%, for a best first 10 calendar month performance since 2017. (See Table 1)
- In absolute dollar terms, October’s estimated month-to-date investment loss is equivalent to roughly -$24.7bn (or -$5,200 per MPF’s 4.75m members) reducing its year-to-date gain to $124.2bn (or $26,100 per member).
- MPF’s October losses are being led by a retreat in Hong Kong and China equities which have failed to capitalize on September’s strong stimulus driven rally, a rally which staggeringly accounts for roughly 90% of MPF’s Hong Kong and China equity gains in 2024.
- As a result of October’s expected monthly loss, MPF Ratings expects MPF’s total asset size to slip from $1.327tr to $1.306tr while average member account balances are expected to fall to $274,700, down $4,400 from the $279,100 all-time record achieved in September.
- Despite October’s short-term setback, MPF Ratings expects the system to deliver record asset sizes and account balances for its 4.75m members by year’s end provided MPF members follow important investment principles.
Francis Chung (叢川普), Chairman of MPF Ratings Ltd, Hong Kong’s independent provider of MPF research, views and education believes the local equity market’s inability to capitalize on September’s strong stimulus driven rally could prevent the MPF system from delivering an 8th month of positive returns for MPF’s 4.75m members in 2024. The lack of impact will see the MPF system’s total asset size and average member account balance slip $20.9bn and $4,400 respectively from its September record highs to approximately $1.306tr and $274,700.
Despite this possible short-term setback, Mr Chung is still confident the system will deliver record asset sizes and account balances by year’s end if MPF members follow some basic but very important long term investing principles.
Quotes:
Despite possible short-term setbacks, MPF Ratings still expects the MPF system to deliver record asset levels and account balances by the end of this year – with one caveat.
“Despite possible short-term setbacks, MPF Ratings still expects the MPF system to deliver record asset levels and account balances by year’s end, but only if MPF members follow the most basic and essential investing principles. Be long term focused, well diversified and do not panic sell when markets correct in the short term which is unfortunately what we saw when US and Japanese equities saw significant falls in the beginning of August.”
A “double loss” which cost MPF members almost 11% in one month!
“August saw MPF members invested in US equities react to the US Nasdaq Index entering correction territory by switching into Money Market Funds at a rate not seen in over five years. Those who sold and moved money into cash, not only crystalized losses and missed a rebound that sees US shares back at near record levels. The cost this ‘double loss’ is equivalent to a 10.6% return.”
Outlook – Uncertainty rather than momentum will dictate market direction for the rest of the year
“All MPF equity asset classes continue to record positive 2024 year-to-date gains however with the upcoming US election around and ongoing geo-political tensions it will be uncertainty rather than momentum that will dictate market direction. To mitigate uncertainty MPF Ratings urges MPF members to remain diversified and long-term focused. Uncertain environments reinforce the strengths and benefits of the MPFA’s Default Investment Strategy (DIS) Funds. Low fees, well diversified, and an automatic risk reduction mechanism takes the stress away from market timing decisions. It is THE ideal MPF fund option for most MPF members.”
Table 1: MPF Ratings’ MPFR Index returns by asset class (as at 22nd October 2024)
Source: MPF Ratings
