Convoy MPF Composite Index recorded a decrease by 8.18%
month-on-month, the largest single-month decrease in the past 4 years
Employees MPF accounts lose HK$16,697 in January and
record a loss for three consecutive months
(1 February 2016, Hong Kong) According to the latest data released by the Investment Research Department of Convoy Financial (“Convoy Investment Research Department”), global stock market has already experienced a mini crash in the first month of 2016. The circuit breaker mechanism introduced in China’s bourses has triggered alarm in the market, which dragged down overall MPF performance. As of 28 January, the Convoy MPF Composite Index dropped for three consecutive months and decreased by 8.18% month-on-month to 174.65 in January, the largest single-month decrease since September 2011. The Equity Index dropped by 12.59% month-on-month to 165.6, also the largest single-month decrease since September 2011, while the Bond Index remained relatively stable declining by only 0.27% to 149.18. In January, the MPF account of each employee lost HK$16,697 on average, the third consecutive month that a loss was recorded.
Kenrick Chung, Director of MPF Business Development of Convoy Financial Services Limited, pointed out that the US not announcing an interest hike last week does not mean the end of future rate hikes. Although governments around the world have strived to protect their economy, it is expected that the impact of rate hike by the US and the unfavorable economic environment in China should continue to cause global markets to fluctuate. He recommended that investors buy global equity funds at low prices to diversify geographical risks. Investors with lower risk tolerance may consider buying funds with guaranteed returns, in particular soft guarantee funds, which offer guaranteed returns and a chance to earn higher returns, subject to specified guarantee conditions. However, investors are reminded to pay close attention to the terms and conditions of funds.
Equity funds dropped more than 10% in general
Regarding the performance of different fund categories last month, China equity funds, Greater China equity funds and Hong Kong equity (index tracking) funds recorded decreases of more than 10%, the most underperforming fund category (see Table 3). An interest hike by the Fed reverberated across stock markets in Asia, Europe and the US, with drops ranging from 5.88% to 9.20%. Global equity funds also declined by 8.33% on average. Among lifestyle funds, the ones with a higher proportion of equities recorded larger decreases.
Meanwhile, bond funds, money market funds, guaranteed funds and conservative funds have become the safe haven as their decreases were relatively moderate. Of these categories, global bond index has increased by 0.48% month-on-month.
The Convoy Investment Research Department has noted the President of the European Central Bank statement following its meeting this month, which stated they would evaluate the effects of the prevailing monetary policy and decide whether to expand quantitative easing in March. The Japanese Central Bank for its part announced the adoption of negative interest rate on 29 January, which is expected to stabilize the global financial market. The US Federal Reserve’s January statement mentioned that board members were slightly pessimistic in their outlook on local economy and inflation. This view hints at the reduced possibility of further interest rate hikes in March and April, and asset prices may well rebound in the short term.