MPF fund performance surges 4.9% in January 2012 as equities rebound

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

Hong Kong stocks gained 1,956 points, or 10.6 per cent, in January 2012, and Mandatory Provident Fund schemes rode the rally. Data from Lipper as of end-January 2012 showed the average MPF fund rose 4.9 per cent in the month, far outpacing the 0.36 per cent gain in December 2011. Equity funds led the way with a 7.39 per cent average gain; China equity funds jumped 11.16 per cent, shaking off the gloom of 2011.

Why did MPF funds gain 4.9% in January 2012?

MPF funds gained 4.9 per cent in January 2012 mainly because a rebound in global equities lifted the market. US economic data improved, corporate earnings held up, and the Federal Reserve extended its low-rate environment to 2014, while Europe’s debt worries eased for the moment. On the mainland, monetary loosening reduced the risk of a hard landing. The positive news restored investor confidence, money flowed back into stocks, and MPF fund performance benefited across the board.

Which MPF funds performed best in January 2012?

Equity-heavy funds were the clear winners; defensive funds lagged behind.

(Figures: Lipper, as of end-January 2012)

What are analysts warning about after the sharp rebound?

A Lipper research director cautioned that January’s rally had been steep, the market looked overbought, and Europe’s debt crisis still posed risks — a correction could follow in the near term. He expected markets to stay volatile through 2012, with MPF returns swinging accordingly.

But he also reminded members that MPF is a long-term investment: those far from retirement could stay with more volatile equity funds in pursuit of better long-run returns, rather than letting short-term swings derail their retirement plans. Members can compare long-term track records at browse MPF funds, and read up on life-stage investing at the MPF education hub.