Hong Kong’s Mandatory Provident Fund reports its lowest annual return since 2011
- Members of the compulsory scheme lost HK$21,191 in 2018, according to financial planning consultants Gain Miles
- Overall return of MPF in 2019 likely to be ‘minimal’
Hong Kong’s compulsory pension scheme, the Mandatory Provident Fund, reported its lowest annual return since 2011, amid a slump in the Hong Kong and mainland China stock markets, according to Refinitiv, the former risk and financial business of Thomson Reuters.
According to Refinitiv, the loss in 2018 – 8.21 per cent – is worse only to the decline reported in seven years ago, 8.94 per cent in 2011. This is in big contrast to 2017, when it gained 20.94 per cent, its second strongest performance on record after 2009, when it generated a return of 25.89 per cent.
According to the Mandatory Provident Fund Schemes Authority, the pension scheme had assets worth HK$858.3 billion under management at the end of September. And given the number of registered employees and self-employed persons in Hong Kong was about 2.8 million at the time, the average loss in book value per person was about HK$24,891.
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A report by financial planning consultants Gain Miles, put the loss at HK$21,191, or 10.36 per cent, on average, for the whole of 2018, which represents the scheme’s biggest decline in seven years.
And market watchers were not optimistic about MPF performance in 2019. “It is likely that the US-China trade war will persist, causing the market to remain unstable this year. As a result, the overall return of the MPF this year is likely to be minimal,” said Gordon Tsui, managing director of Hantec Group Hong Kong.
Among the different types of funds under the scheme, Hong Kong Dollar Bond and Hong Kong Dollar Money Market were the only ones that recorded positive returns. Equity funds slumped badly overall in 2018, in which the worst performer, Equity Korea, fell by 24.7 per cent, while Equity Hong Kong fell by 13.11 per cent and Equity China fell by 13.64 per cent. Equity Asia-Pacific (excluding Japan) and Equity Global dropped by 15.16 per cent and 12.6 per cent, respectively. Equity Europe and Equity Hong Kong, on the other hand, fell by 15.42 per cent and 17.29 per cent, respectively. Equity US performed the best out of all regions, but still reported a decline of 7.39 per cent.
Defensive assets also suffered, with the Guaranteed Fund dropping by 2.22 per cent, while Bond Global and Bond CNY had a recorded loss of 1.72 per cent and 0.21 per cent, respectively.
