MPF Holders Endure a YTD Loss of 15%

Volatile markets and tough-talking central bankers contributed to the drag on MPF performance.

Kate Lin 15 September, 2022 | 15:34
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Losses continue to mount for Mandatory Provident Fund (MPF) holders in Hong Kong, as in August, all fund categories are in the red, with an average monthly loss of 2.3%. The scheme’s average year-to-date loss widened to 14.5%.

As there are no options for MPF holders to hold cash in their accounts, an unusual dual hit on both stocks and bonds makes the going hard for even the most risk-averse investors. All 23 MPF categories recorded a negative return for August and the year-to-date period.

Money-market funds, products that are closest to cash in the scheme, were also down. In August, HKD-denominated money market funds came in as the top-performing category, down 0.03% while those denominated in both HKD and Renminbi ranked fifth and slid 1.15%. China bond, Asia bond, HKD bond each edged down slightly by 1.2%-2.1% for the month.

U.S., European Equities Fall in Inflation Fears

MPF funds investing in risky assets, particularly those with a developed market focus, endure a continued correction. As U.S. inflation rose 8.3% in August, and fears abound that this rise will continue, investors worry that companies won’t be able to as easily pass on cost increases to consumers, which in turn, will eat into operating margins.

Meanwhile, to tame soaring inflation, central bankers continue to raise interest rates. The Eurozone’s central bank raised interest rates by a record margin, while the U.S. Federal Reserve also reiterated a hawkish tone, even after four consecutive rate hikes, including two back-to-back 75-basis-point increases.

Clouded by the uncertain economic outlook, MPF categories such as Europe, U.S., and global equity were among the worst performers for August, with losses ranging between 4% and 6%.


Asia Equities Hold Up Well

Compared to developed market equity funds, Asia-Pacific ex-Japan (minus 0.27), Asia ex-Japan (minus 0.61), and Hong Kong equity (minus 0.93) held up relatively well, ranking only behind the HKD money market funds.

By individual funds, two Asia-Pacific ex-Japan equity index funds, Hang Seng MPF-ST Plus-VC APAC Eq Tracker and HSBC MPF-ST Plus-VC APAC Eq Tracker took the top spots with a 0.16% return. Principal 800 Asian Eq D and BCOM MPF Conservative Fund closely followed with a 0.13% return.

After the top four, only seven more funds made a positive return for August – they are in Asia ex-Japan equity, guaranteed fund, or HKD money market category.

Turning to the worst performers, the first 10 funds all belong to the Europe equity category, with Manulife GS MPF Euro Eq losing the most within the month. The fund was down slightly less than 10%, deepening its year-to-date loss to 34.1%.

2022 Continues to be a Tough Year for MPF Holders

Among the 23 MPF categories covered by Morningstar, none produced positive returns year to date. A total of 61 funds so far recorded a loss of more than 20%, and another 332 funds posted a negative return of over 10%.

China & greater China equity funds are yet to shrug off weakness despite several short-lived rallies, tumbling 21.0% since January. The second-worst performer was Europe equity, which plunged 20.5% on average. Asia ex-Japan equity, global equity, target date, aggressive allocation, and US equity lost at least 18% in the first eight months of 2022. Year-to-date, the two cash management categories, though returning negatively, are the frontrunners.


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About Author

Kate Lin

Kate Lin  is a Data Journalist for Morningstar Asia, and is based in Hong Kong

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