MPF fund performance in January 2012: equity funds rebound 7.39% as defensives lag

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

The new year brought a new picture for MPF. Lipper statistics as of end-January 2012 showed MPF returns up 4.9 per cent month on month, with every constituent fund category in positive territory and equity funds leading the pack. Experts cautioned, however, that Europe’s debt crisis was unresolved and markets had already risen substantially — a pullback could be on the cards.

Why did equity funds lead MPF fund performance in January 2012?

Equity funds led MPF fund performance in January 2012 because a rebound in global equities carried them higher. Extending December 2011’s gains, equity funds rose 7.39 per cent and mixed-asset funds 4.69 per cent in January, making them the big winners. China and Korea equity funds — among the worst hit the previous month — rebounded hardest, up 11.16 and 10.31 per cent respectively, while Hong Kong equity funds gained 9.47 per cent. Defensive bond, money market and guaranteed funds managed only 1.71, 0.01 and 1.24 per cent.

Aggressive vs defensive: January 2012 returns compared

What were analysts warning about Europe’s debt overhang?

A research director at Thomson Reuters Lipper Hong Kong said the debt crisis was far from over, with Greece, Italy and Spain still mired in debt and investors staying on the sidelines. The recent rally, he said, was driven mainly by central banks pumping liquidity into markets and better-than-expected US data — a temporary bounce rather than a firm footing.

With markets already up substantially, he saw limited room for further big gains and a real risk of a correction, urging investors not to let their guard down. MPF is a long-term investment, he added, and short-term swings should not prompt frequent fund switching. Members can compare fees and track records across categories at browse MPF funds.