Over the US fiscal cliff and out of the financial woods
There's still some turbulent times ahead for the North American market but many signs are pointing to a pickup after next year's first quarter
When Hongkongers moan about the lousy performance of their Mandatory Provident Fund schemes, they usually focus on the ruinous fees they get charged.
But while high fees have certainly weighed on MPF returns, they are not the whole story. Poor asset allocation is also to blame.
One reason why MPF equity funds have managed an annualised net return of just 2.4 per cent over the last three years - lower than Hong Kong's average rate of inflation - is that so little of their assets under management have been invested in the United States.
As of September 30, just 5 per cent of MPF equity fund assets were invested in North America, less even than in Europe.
And that's a problem because the US market has actually done rather well recently. As the first chart shows, in Hong Kong dollar terms the benchmark S&P 500 index of US stocks generated a total return of 45 per cent over the three years to September. In contrast, the total return from Hong Kong's Hang Seng Index was 9.8 per cent, while the euro-zone's Euro Stoxx 50 Index lost 16.5 per cent.