Hong Kong’s compulsory pension scheme records worst performance in three years, pays for over reliance on Hong Kong and Chinese stocks

The about 400 investment funds under the MPF mustered a gain of 0.64 per cent, according to calculations made by the Post using Refinitiv Lipper data

The city’s 4.5 million MPF members earned about HK$1,706 each last year

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Hong Kong’s Central district. The MPF’s overall performance last year was affected by the poor performance of Hong Kong equities, an analyst says. Photo: Sam Tsang

Published: 7:30am, 7 Jan 2022

The Hong Kong compulsory pension scheme’s over reliance on Hong Kong and Chinese stocks proved to be its undoing in 2021.

As the Hang Seng Index and the Hong Kong-listed shares of mainland Chinese companies slumped to their biggest losses in a decade, the about 400 investment funds under the city’s HK$1.2 trillion (US$153.8 billion) Mandatory Provident Fund (MPF) last year recorded their worst overall performance in three years, according to Refinitiv Lipper data. In 2018, these funds reported a loss of 8.2 per cent on average. In 2019 and 2020, they reported gains of 12.7 per cent and 12.2 per cent, respectively.

Last year, the funds mustered a gain of 0.64 per cent, or HK$7.6 billion (US$984.6 million), according to calculations made by the Post using the Refinitiv Lipper data. On average, each of the 4.5 million MPF members earned about HK$1,706 last year – far lower than about HK$30,000 in 2020.

“Overall MPF performance in 2021 was affected by the poor performance of Hong Kong equities,” said Kenrick Chung, general manager of employee benefits at Realife Insurance Brokers. “In 2022, there are still systematic risks – of the Covid-19 pandemic, China-US tensions, geopolitical risks and inflation – to be concerned about,” he said. Additionally, many central banks may increase interest rates this year to fight inflation, which will pose a risk to capital markets, Chung added.

The MPF allows members to choose how they allocate their contributions, in different funds that invest in stocks, bonds, currencies and mixed assets. Both China and Hong Kong equity funds last year reported their worst losses in 10 years, which hit many members hard as they are the most popular fund choices and represent a third of all MPF assets.

China stock funds, which invest mainly in shares of Chinese companies listed in Hong Kong, lost 19 per cent on average last year and were the worst performers among the funds tracked by Refinitiv Lipper. This was their worst performance since a 20.5 per cent loss in 2011. These funds gained 13.5 per cent in 2020.

MPF members investing in Hong Kong stock funds also suffered a 14 per cent decline, which was also their worst performance in 10 years, since a 19.8 per cent loss in 2011.

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