Investment Objective

The objective is to achieve a long term return in excess of Hong Kong price inflation (as measured by the Consumer Price Index Type A) *. The proposed asset allocation of the underlying APIF is 30-60% equities, 20-60% bonds and 0-20% cash or cash equivalents. It is a medium risk fund portfolio. The target long term return of the constituent fund may not be achieved due to market circumstance. It may be lower than the Hong Kong price inflation.

Fund Details

Latest Fund Expense Ratio: 1.97%

Launch Date(dd/mm/yyyy): 01/12/2000

Unit Price: HKD 14.60

Fund Size: HKD 136.8M

Fund Commentary

The spread of the COVID-19 coronavirus profoundly affected global markets in the first quarter. Equities suffered steep declines and bond markets were highly volatile. US equities declined significantly, with confirmed US cases between 4 March and 27 March rising from 150 to over 100,000. The Federal Reserve cut rates twice in the month for the first time since the global financial crisis and announced unlimited quantitative easing. The US Senate also passed a $2 trillion stimulus package. Jobless claims rocketed by over three million in March and economic indicators suggest more pain will follow. Energy stocks were hit hard, with the addition of an oil price war weighing. IT and healthcare held up better. Eurozone shares also fell sharply over the quarter as Europe became the epicentre of the coronavirus outbreak, with Italy and Spain among the most severely affected countries. Nations across Europe took steps to restrict the movement of people and shut down parts of the economy in an effort to slow the spread of the virus. All sectors fell over the quarter. Defensive areas of the market such as healthcare and utilities performed best, while financials and industrials (which includes airlines) were among the worst hit sectors. UK equities also faced sharp losses as efforts to deal with the pandemic hit economic activity indiscriminately and simultaneously in all regions of the world. Prior to these events, domestic politics and Brexit had dominated the narrative around UK assets for much of the quarter. Asia ex Japan equities also sold off in the first quarter. ASEAN markets were particularly weak and all underperformed. India finished behind the index as the number of COVID-19 cases began to increase, and the government announced a national lockdown. China and Hong Kong were the only markets to outperform; the number of active cases of COVID-19 in mainland China appeared to peak in February, while the spread of the virus appeared to be relatively contained in Hong Kong. Emerging market (EM) equities fell heavily over the quarter, with a stronger US dollar compounding the impact of the spread of the coronavirus. Brazil was the weakest index market, with currency weakness amplifying negative returns. Colombia, which was also impacted by the sell-off in crude oil prices following the failure of OPEC+ talks, Greece, South Africa and Pakistan all underperformed. Taiwan, which has fewer cases, finished ahead of the index along with China. The lockdowns being imposed to slow the spread of COVID-19 are exerting a serious toll on global economic activity. Our latest forecast seeks to quantify this impact amid considerable uncertainty; we now expect to see the world economy contract by 2.9% in 2020, before rebounding by 6.9% in 2021. This forecast incorporates a severe recession in the first half of this year which, even with a rebound in the second half, means 2020 is set to be the worst year for activity since the 1930s. Although there has been an unprecedented level of support from central banks and governments, the dramatic downturn reflects the effect of shutting down large swathes of the economy. Despite this stark forecast, the balance of risks likely remains skewed to the downside. Until a vaccine is developed and deployed, there is a very real chance that the virus may return once lockdowns are ended. This would almost certainly result in a double-dip of activity, with a second wave of lockdowns initiated.

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