Hong Kong MPF likely to end 2011 in the red: down 5.29% in ten months

2011 saw trustee after trustee cut MPF fees — HSBC led in February, AIA followed in August, BCT and Fidelity slashed on the same November day. But cheaper funds are still not safe funds: as the global economy weakened in the second half, MPF fell for months, recovering only in October (+6.64%). Over the first ten months, MPF still lost 5.29%.

How will MPF returns end 2011?

MPF lost 5.29% in the first ten months of 2011; October’s 6.64% rebound could not repair the damage. With Hong Kong stocks down nearly 18% for the year and emerging markets broadly in double-digit declines, equity funds were almost certain to end “in the red”, and the overall fund universe was unlikely to recover in the final two months. Equity funds fell over 10% in ten months; bonds rose about 4%.

The fee map inside the price war

Across the cutters, the fee ladder was clear: conservative funds cheapest (HSBC from 0.26%), passive funds next (AIA index funds from 0.99%), bond and equity funds dearest for needing active management — BCT’s Hong Kong equity fund capped at 1.435% after its cut, HSBC and Fubon at 1.7%.

BCT’s Ka Shi Lau: equity funds certain to lose, stay defensive

Ka Shi Lau said that beyond the market drag, “funds with equity content will certainly lose money” and the full year would stay negative — though conservative funds remained positive. Her contrarian-play advice: employees should take a more conservative stance in prevailing conditions.

What members can do when MPF is in the red

Down 5.29% in ten months — yet this was diversification’s value on display: bonds gained about 4% and conservative funds stayed positive. “Go defensive” suits those nearing retirement; younger members dumping equity funds at the lows turn paper losses real. Start with your time horizon, then set allocation. The MPF education hub has playbooks for different markets.