May 2012: MPF’s worst May on record as workers lose HK$9,146 each

This article is a rewrite of a report from June 2012.

Hong Kong MPF suffered its worst May since launch. Lipper Hong Kong data showed the average return across 433 MPF funds fell over 6 per cent in May 2012, leaving the year-to-date gain versus end-2011 at just 0.84 per cent — meaning the year’s contributions had been essentially “wasted”.

How much did May cost?

Over HK$9,000 per worker. May’s average 6.03 per cent drop was the steepest monthly fall of 2012’s first five months and the worst May in MPF history. On MPF assets of about HK$390.7 billion at end-March 2012 (excluding later contributions), the month erased over HK$23.5 billion — about HK$9,146 per worker on paper — nearly resetting the year’s performance.

Equities fell across the board: European stocks at the euro-crisis epicentre plunged 11 per cent; China, Hong Kong, Greater China and Asia-Pacific-ex-Japan equities dropped 9.2–10.6 per cent; North American equities, down under 7 per cent, counted as “resilient”. The only gainers were HKD bonds (+0.32 per cent) and HKD money markets (+0.01 per cent) — a clear flight to safety.

How to position after MPF losses?

Over the first five months most categories still held their ground: pharma and healthcare equities led at +6.1 per cent, Hong Kong, Greater China and Asia-Pacific-ex-Japan equities gained 1.54, 1.82 and 2.49 per cent, and European equities lagged at -4.4 per cent.

Lipper’s Hong Kong research head said international uncertainty would persist — for a 10- to 20-year holding horizon, standing pat made sense, possibly favouring high-potential or Asia-focused funds. An independent financial adviser, however, expected a choppier second half and suggested adjusting contribution mixes to keep more cash on hand. (A few garbled characters in the original have been reconstructed from context.)