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Hong Kong’s compulsory pension scheme MPF lost each member HK$10,800 (US$1,387) in the third quarter as China regulatory and Evergrande debt crisis converged in a perfect storm to crack markets lower.

 HK MBF

Hong Kong stock funds were the second worst performers among all MPF funds, losing 14 % in the third quarter and 8.8% in the first nine months of this year

The stock market in Hong Kong has been hit by Beijing’s crackdown on technology and private education firms in July, and then the debt crisis at mainland Chinese developer China Evergrande Group. It was the worst quarterly average performance since the first quarter of 2018 for the Mandatory Provident Fund (MPF) when funds lost 6.5 per cent on average.

“We noticed the adverse stock market sentiment. Since the MPF is a long-term investment spanning 30 to 40 years, it is inevitable that there will be economic cycles over such a long period. MPF scheme members, therefore, need not be too concerned about short-term market fluctuations,” a spokeswoman of the Mandatory Provident Fund Schemes Authority (MPFA) said on Tuesday.

The 400 or so MPF investment funds tracked by data provider Refinitiv Lipper lost 4% on average in the three-month period, wiping out almost all of the 4.5 per cent gain recorded in the first half of 2021. The MPF’s gains for the first nine months of this year now stand at just 0.3% 

“The MPF’s third-quarter performance was negatively affected by China Evergrande, Beijing’s crackdown on different industries in China and concerns about inflation globally. Moreover, the possibility of the US Federal Reserve tapering off quantitative easing and concerns about the US government’s debt ceiling have also added worries to the market,” said Kenrick Chung, general manager of employee benefits at Realife Insurance Brokers.

What is the MBF

The MPF covers 4.5 million current workers and retirees in Hong Kong, who can choose where their monthly contributions are invested. The compulsory scheme’s performance has been affected by a 14.7 per cent slump in the city’s benchmark Hang Seng Index, as well as a 25 per cent drop in the Hang Seng Tech Index in the third quarter, because Hong Kong and China stock funds are popular among MPF members, who usually invest about third of their money in them.

The HK$1.22 trillion MPF lost a total of HK$48.6 billion in the third quarter, according to calculations based on data provided by Refinitiv Lipper and the MPFA. That equals a loss of HK$10,803 for each of the scheme’s 4.5 million members.

China Stock Funds Performance versus other countries

China stock funds, which invest mainly in shares of mainland Chinese companies listed in Hong Kong, lost 16 per cent on average during the third quarter and were the worst performers among funds tracked by Refinitiv Lipper. These funds have also lost 14 per cent in the first nine months of this year, and were the worst performers for this time frame too.Hong Kong stock funds were the second worst performers, losing 14 per cent in the third quarter and 8.8 per cent in the first nine months of this year, the data showed. - SCMP

  • Japanese equity funds gained of 5.4 per cent as Japanese stocks rebounded to 30-year highs and became the world’s best performers in September and the third quarter.
  • Health care sector funds and US stock funds both rose about 1.4 per cent during the three-month period.
  • US stock funds were the top performers in the first nine months of the year, rising by 15.7 per cent.

Source: SCMP

From The TradersCommunity Research Desk

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