Mandatory Provident Fund (MPF)

Hong Kong’s MPF reports average loss of 2.94 per cent in February after 13 months of gains

The losses follow an average gain of 4.35 per cent in January

PUBLISHED : Monday, 05 March, 2018, 7:33pm
UPDATED : Monday, 05 March, 2018, 11:11pm

Hong Kong’s Mandatory Provident Fund reported its first monthly loss in over a year, with its February returns down by an average of 2.94 per cent, according to data by Thomson Reuters Lipper.

The 481 funds investing in the MPF reported the loss – the compulsory retirement plan’s first after 13 consecutive months of gains. The plan, which had HK$843.5 billion (US$107.7 billion) in assets last year, covers 2.8 million people in the city.

Louis Tse Ming-kwong, the managing director of VC Wealth Management, said the MPF fell alongside global markets during last month’s correction.

“Looking ahead, the MPF is likely to have a bumpy year alongside stock markets worldwide.

“The Hong Kong market fell by more than 600 points today over worries about a trade war between China and the United States. The US interest rate rises this year will further add pressure to the stock markets in the US and Hong Kong,” he said.

“It would be very difficult for the MPF to repeat its strong return from last year. But then, the members should take the MPF as a long-term retirement investment, so they do not need to worry too much about short-term volatility,” Tse said.

Hong Kong’s Mandatory Provident Fund beats inflation in 17-year history to record 4.8pc returns

The loss in February follows an average gain of 4.35 per cent in January, but it beat the Hang Seng Index, which lost 6 per cent last month. 

The benchmark index rose by 10 per cent in January after recording a gain of 36 per cent last year, which helped the MPF report a gain of 20 per cent in 2017, its best since 2009. 

Almost all types of funds reported losses in February, with only two money market funds profitable – the Hong Kong money market fund reported a modest gain of 0.01 per cent, while the US money market fund rose by 0.15 per cent. Money market funds were the worst performers during the bull run last year and in January, but they outperformed other fund types during the stock market correction in February.

Equity funds, the most popular investment choice, picked by 42 per cent of employees, recorded the biggest loss during the month as US, European and Asian markets, including Hong Kong’s, tumbled amid worries about interest rate increases and a trade war between Washington and Beijing.

Hong Kong’s MPF gains most in almost two years with 4.35 per cent return in January

The MPF is likely to have a bumpy year alongside stock markets worldwide
Louis Tse Ming-kwong, managing director, VC Wealth Management

Data shows that China equity funds recorded the biggest loss, at 7.79 per cent, last month, compared with a strong average gain of 14.02 per cent in January, when they were the biggest winners.

A single health care fund lost 6.38 per cent in February and was the second-worst performer. Hong Kong equity funds came in at third with a loss of 5.74 per cent in February, compared with a solid return of 9.6 per cent in January, when they were the second-best performers.

Funds investing in Asia-Pacific stock markets excluding Japan reported a loss of 4.3 per cent last month, compared with a gain of 6.04 per cent in January.

US equity funds lost 3.45 per cent in February, compared with a gain of 5.55 per cent in January.

Mixed-asset funds, which invest in stocks as well as bonds, lost 1.4 per cent in February, compared with a gain of 5.26 per cent in January.

They account for 37 per cent of all MPF assets, the second-most popular choice among employees.

The bonds fund lost 0.82 per cent.