MPF First-Half Return Just 1.4%, Trails Inflation — Experts: Stay Long, Stay in Asia Equities

Global markets were turbulent in the first half of 2011, and MPF delivered only a 1.4% return for the half — better than near-zero bank deposit rates, but trailing inflation by a wide margin. With the European debt crisis and the US debt-ceiling fight clouding the outlook, experts advise members against frequent switching and recommend staying long in Asia-Pacific equity funds with growth potential.

How bad was the first-half MPF return?

1.4% overall, well behind inflation. Europe’s debt woes and the US debt-ceiling dispute dented investor confidence, while hot emerging-market inflation and a slow manufacturing supply-chain recovery kept global equities struggling — and members’ MPF investments suffered with them.

Why do experts favour Asia-Pacific?

Young populations and near-double-digit growth; equities beat bonds over 20 years. Ho Bang (Hong Kong) director Leung Yin-wing noted European funds rebounded to beat Greater China funds in H1, but their long-term returns are unremarkable — not a long-haul pick. Asia-Pacific, by contrast, has youthful, growing workforces driving economies at near-double-digit rates. Lipper Hong Kong research head Wong Chak-ming stuck with his year-start call: half in developed-market equities, half in developing-market equities.

What is the “bonds at the top, equities at the low” strategy?

Rotate into bonds late in the bull run, back into equities after the fall — twice per cycle is enough. Leung advises against frequent rebalancing: keep contributions in equity funds during bull markets, exit to bonds when everyone is happy with prices (late bull), and rotate back into equities after prices drop. Invesco chief investment officer Chan Pak-kui added that central-bank rates below pre-crisis levels mean excess liquidity will stoke inflation — Asia-Pacific and US equity funds merit attention.

Compare funds’ past performance at MPF fund comparison.