Hong Kong’s MPF sees total assets climb back above crucial HK$1 trillion mark after record November gains, members earn HK$20,300 each

The total assets of Hong Kong’s Mandatory Provident Fund (MPF) rose back above the psychologically important HK$1 trillion (US$128 billion) mark in November after a record monthly bounce, thanks to a stock market rally in Hong Kong and mainland China.

The compulsory retirement scheme reported a record monthly gain of HK$92.9 billion last month, with each of its about 4.6 million members earning HK$20,300 during the month, according to data by MPF Ratings, an independent pensions research firm.

All categories of funds report a gain in November, with all 412 investment funds reporting a return of 9.8 per cent on average. November’s gains represent the best monthly returns on record since the MPF was set up in 2000. On a first 11-month basis, however, these investment funds still lost 16 per cent, MPF Rating data shows.

“MPF Ratings reiterates that diversification and long-term investing, not short-term market speculation, are key to long-term wealth creation,” said Francis Chung, MPF Ratings’ chairman. He, however, urged investors to not be over optimistic about a further bounce.

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The MPF’s returns have been diminishing for the past four years. They dropped from a 12.7 per cent gain in 2019 to a 12.2 per cent increase in 2020, then to a 0.6 per cent rise last year, according to data from Refinitiv Lipper.

In the absence of a further bounce in December, the MPF is on track to reporting its first yearly loss since 2018. The MPF’s 412 investment funds have lost 16 per cent on average in the first 11 months of this year, MPF Ratings data shows, compared with a loss of 8.3 per cent in 2018 and a record decline of 26 per cent in 2008, during the global financial crisis.

The November gains have narrowed the MPF’s losses year-to-date to HK$30,000 each and raised the total MPF assets to HK$1.04 trillion. The compulsory pension fund’s total assets fell below the HK$1 trillion threshold in September after it reported its worst first nine months on record with a loss of HK$258.9 billion. At the end of 2021, it stood at HK$1.2 trillion.

Hong Kong and China stock funds were the best performers in November among the MPF’s various fund types, with an average gain of 26 per cent. These are, however, the worst performers in the first 11 months of this year and have lost 24 per cent, MPF Ratings data shows.

Hong Kong’s benchmark Hang Seng Index soared 27 per cent in November, capping its biggest monthly gain since October 1998. The Tech Index rallied 2.8 per cent, while the Shanghai Composite Index completed an 8.9 per cent gain for the month. The rally came after Beijing eased some coronavirus pandemic restrictions and unveiled measures to bail out cash-strapped developers.

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Asian equity funds ranked second with a gain of 13 per cent in November while mixed-asset funds that invest in both bonds and stocks gained 12.5 per cent. They both have, however, declined by about 19 per cent in the first 11 months of this year.

Default investment strategy funds, which change investments between stocks and bonds according to the age of employees, reported a 5 per cent gain in November and a loss of 13 per cent year-to-date.

Money market funds that invest in time deposits of different currencies reported a gain of 1.8 per cent in November, but a loss of 5.3 per cent so far this year, as a result of the volatile valuations of foreign currencies against the US dollar.

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The poor performance of the MPF this year has also coincided with the city entering an economic recession after social-distancing measures for the pandemic hit a wide range of businesses.

“In November, there was increasing news about the easing of quarantine in China. Moreover, China started to offer different policies to support its economy, especially the property market. Furthermore, there was expectation that the US Federal Reserve will become less aggressive when it comes to rate hikes,” said Kenrick Chung, director of Ben. Excellence Consultancy, a Hong Kong-based insurance broker.

“Those are major reasons for the gain. If there is no more negative geopolitical news, we can expect to have positive returns in December as well. This can be a good Christmas gift for the MPF,” he said.

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Next year, the MPF’s performance will, however, still be affected by rate hikes, geopolitical tensions and economic development in China, he added.