The Home-Bias Tax: Staying in Hong Kong Equity Funds Cost You 71.4 Percentage Points

Track 1 · Data Exposé | Sources: LSEG Lipper (as of 31 Aug 2026), MPFA (18 Aug 2026 release)

The Core Claim

The market MPF members know best delivered the most unfamiliar report card of 2026. Hong Kong equity funds are up just +0.2% year to date; over the same period, Korea equity funds surged +71.6%, the strongest of all Lipper MPF classifications. The 71.4-percentage-point chasm between them is the tax that “home bias” levies on your retirement — not because you picked the wrong fund, but because you only dared pick the familiar one.

Lipper names the cause: Korea rode the global AI supply chain — memory semiconductors and high-bandwidth memory demand exploded, while earnings visibility, improving corporate governance and foreign inflows drove a wholesale re-rating. The same report is blunt about the laggards: China, Hong Kong and India “lagged materially” — the Hang Seng fell 1.2% in August and remains negative for the year; the KOSPI is up 61.8% year to date, the TAIEX 59.3%.

Through the Data

The promise of “familiar means safe,” settled in net terms: MPF overall averaged +1.2% in August, yet the Hong Kong equity category fell 1.1%. Home bias didn’t give you safety — it gave you a concentrated single-market bet, and in 2026 that bet landed on the worst-performing major market of all.

The Compounding Cost

Translate the percentages into Hong Kong dollars. Suppose you had HK$100,000 in MPF equities at the start of the year:

• Korea equity fund → roughly HK$171,600
• Hong Kong equity fund → roughly HK$100,200

Same starting line; eight months later the gap is HK$71,400. On a HK$500,000 balance — a typical figure for a worker with a decade-plus of contributions — the gap widens to about HK$357,000, equivalent to several years of total mandatory contributions, erased by the single word “familiar.”

A forensic footnote, in honesty: 71.6% is the product of an AI-semiconductor concentration cycle, not a repeatable annual promise. The lesson is not “you should have bought Korea” — it is structural: parking your entire equity allocation in one market is a gamble with no compensation.

The Way Out

1. Find the diversification tools already on your scheme’s menu. Asia Pacific equity funds (with natural Korea and Taiwan semiconductor exposure) are up 37.1% year to date; US equity funds +11.9% — the only genuine diversifier inside MPF, with the lowest correlation to Hong Kong equities.

2. Use DIS as your passive benchmark. MPFA data: the Core Accumulation Fund has annualised 7.3% since its 2017 launch and now holds 11% of total MPF assets (HK$188.6 billion). The “do nothing” default beats most active switchers over time — that is the hurdle any reallocation must clear.

3. Forward-pricing protection: phase in, never chase. MPF uses forward pricing (T+1/T+2) — you can never buy at today’s price, and eMPF switching carries days of out-of-market cash drag. The correct move is a fixed allocation (e.g. 20–30% of the equity sleeve in Asia Pacific/global), rebalanced on schedule — not jumping ship after a single +8.6% month.

4. Discipline over timing. 2026’s lesson is not “bet on Korea.” It is “don’t bet your retirement on a single market.” Geographic diversification is architecture, not prediction; rebalancing is discipline, not chasing.

Investment involves risk. Fund prices can go up and down; past performance is not indicative of future performance. Data as of 31 August 2026, for education only — not investment advice.