Looking back at 2011: two straight losing months for MPF funds

Back in the autumn of 2011, Hong Kong’s MPF funds lost money for a second consecutive month: after a 6% drop in August, September brought a further 7.7% fall, wiping out 14% in just two months. Equity funds remained the worst-performing category, with China and Greater China equity funds sliding 18% in the month and Hong Kong equity funds down 15%; Japan equity funds, off just 2%, were the most resilient of the group.

Why did MPF equity fund returns fall so hard in September 2011?

MPF equity fund returns fell 12% in September 2011 as the European and US debt crises kept global markets searching for a bottom, with Asian equity funds suffering the steepest losses. Combined with August’s 6% decline, MPF funds lost 14% across two months — their worst consecutive showing since the 2008 financial crisis.

Bond funds stumbled too; only Hong Kong-dollar bonds stayed positive

Mixed-asset funds fell 7% in September, while bond funds lost 2%, dragged down by weakening global bond funds. Notably, Hong Kong-dollar bond funds still managed a slight 0.3% gain for the month — the lone bright spot among bond funds.

The Lipper Hong Kong research director quoted at the time said the European and US debt crises had produced the worst MPF showing since the 2008 financial crisis, and worried the fourth quarter would bring little improvement.

Three lessons from that episode

Looking back at September 2011, a few things stand out. First, heavy concentration in Asian equities magnified losses when markets fell. Second, even bond funds, often seen as steadier, could not escape when global bonds came under pressure together. And third, the small positive return from Hong Kong-dollar bond funds that month remains a reminder that diversification across assets and regions is the real defence against volatility.

Members can explore how different fund types behave in falling markets at the retirement investment education hub.