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The outbreak of novel coronavirus led to more market uncertainty

Convoy MPF Composite Index falls by 1.47%

(28, February 2020—Hong Kong) As of 20 February, the Convoy MPF Composite Index was 241.79, with a 1.47% month-to-month decrease. As the novel coronavirus infection continued, investors’ uncertainty regarding the situation dominated the market sentiment.

 

Price of safe haven assets rises           Chinese market influenced the Asian markets

 

In February, markets are full of uncertainty. Investors are uncertain about the novel coronavirus infection and whether it can be contained. Safe haven assets such as gold and government bonds have rallied. This is traditionally a sign that investors are concerned as to what the future holds and would rather invest in something that they feel better able to preserve their capital rather than gamble on potentially risky equity markets. This has led to gold hitting its highest level in almost seven years.

 

With parts of China in lockdown, the expectation is that Chinese growth is going to slow down sharply, this affected not only the performance of the Chinese market, but Asian markets that are heavily exposed to China. The South Korean President has warned that emergency measures will be necessary to be taken to prevent crisis within the country, leading to a promise of a $4.6 billion stimulus package.

 

Japanese market is under pressure  Global market rises

 

Surprisingly the Japanese market has experienced the most difficult time this month, losing more than the Chinese market. The Autumn consumption tax increase has had a bigger impact than expected, rising prices have caused the Japanese consumer to stop spending, leading to the economy shrinking by an annualized rate of 6.3% in Q4. The country now appears to be heading towards a recession, similar to 2014 the last time the tax was increased. The export led economy is heavily dependent on both trade with China and Chinese consumer spending from tourism both of which are taking a hit at the worst possible time for the country.

 

Overall global stocks outside of Asia, particularly the US have held up, implying current expectations that the virus will be a regional rather than a global issue. Although there is a clear threat to multinationals with Apple warning that iPhone supply will be constrained due to issues in Chinese factories, Apple’s stock initially fell off the back of the news (as well as others heavily dependent on the company), but it had recovered by the end of the month. If the virus could be contained, a V shaped recovery is expected and the Chinese market quickly recovers from its recent falls. However, if the virus spreads, it will drag global markets down with it.

 

Ms. Bonita Leong, Group Chief Product and Strategy Officer, Convoy Global Holdings Limited, said that “Although the US and Europe market remains positive in Feb, we saw the new coronavirus start affecting the Greater China and Asia market, and weakening the confidence of investors globally. Fixed-income funds benefited from the unease, and supported the positive return of the hassle-free and lower cost DIS funds.

 

As mentioned previously, the uncertainty of the market's response to the spread of the virus is unavoidable. The uncertainties on the growth in the global economy continue to increase. However, as mentioned by recent MPFA's report on 2019's MPF investment performance, the 2.4% global economic growth in 2019, the slowest pace since the global financial crisis in 2008 did not slow down the MPF system, which registered a return of 12.2% in whole. For MPF members who are investing for long term growth in retirement savings, stay invested to capture the opportunity of buying low in the recent short term drop in the market.”

 

Summary of Performance of MPF Key Funds Class in February

◼ On balance more sectors posted negative performance than were positive over the month as markets were dragged down by coronavirus fears.

Equity Funds:

◼ Japan Equity made the biggest loss over the month, falling 4.51%, with the country likely to be entering a recession. The country experienced a dual blow as domestic spending dried up due to the consumption tax rise last year and the country’s heavy exposure to China with the knock-on effects of the coronavirus.

 

◼ Asian Equity sectors posted negative returns for the month ranging from -2.40% to -4.16% (excluding Japan). The coronavirus has the potential to significantly slow growth in the Chinese economy and its neighbors and it appears that investors are starting to factor this in.

 

◼ United States bucked the trend and was the only equity sector to post a positive return for the month returning 1.80%. Although some multinational companies have significant exposure to the Chinese market, for the moment it appears investors are confident that the virus will be contained to China and its neighbors.

 

Bond Funds:

◼ Bond sectors overall held up well with Fixed Interest HKD the best performing at 1.29%, followed by Global at 0.72%. The markets were generally boosted by significant inflows into government bonds. With investors being uncertain regarding global markets, many have chosen to invest in the lower but more certain returns offered by the bond market rather than the high-risk equity markets. This is because governments are expected to honor the debt obligations, even if the economic conditions are tough, whereas equity markets are dragged down by negative sentiment.

 

◼ The only bond sector to post a negative return was Fixed Interest RMB at -0.70%. This can be attributed to currency movements. The negative economic sentiment in China caused the currency to weaken eliminating any possible gains for those investing in Hong Kong dollars.

 

Mixed Assets Funds

◼ DIS Age 65 Plus was the best performing, with return up to 1.45%. The worst performing was the Mixed Asset 81% to 100% Equity, as a result of its high weighting to Asian equity markets. 

 

Convoy MPF Index Trend

  • SOURCE: CONVOY FINANCIAL SERVICES LIMITED
  • COMPILED BY THE CONVOY FINANCIAL SERVICES LIMITED
  • DISCLAIMER: THE CONTENT IS FOR REFERENCE ONLY AND DOES NOT CONSTITUTE ANY SUGGESTION AND OFFER FOR INVESTMENT. PLEASE DO NOT RELY ON THIS ARTICLE FOR YOUR INVESTMENT DECISION. INVESTMENT INVOLVES ELEMENTSOF RISK AND THE HISTORICAL DATA OF THE FUNDS IS NOT NECESSARILY AN INDICATOR OF THEIR FUTURE PERFORMANCE.CONVOY FINANCIAL SERVICES LIMITED ("CONVOY") HAS UNDERTAKEN REASONABLE EFFORT TO PREPARE THE CONVOY MPFINDICES. CONVOY CANNOT GUARANTEE THE ACCURACY

 

Performance of Convoy MPF Indexes:

MPF Indexes

February

Month-on-month

Year-To-Date*

Convoy MPF Composite Index

241.79 -1.47 0.68

Convoy MPF Equity Index

262.32 -2.85 0.45

Convoy MPF Bond Index

162.02 0.84 1.24

Convoy MPF DIS Core Accumulation Index

108.15 0.50 2.52

Convoy MPF DIS Age 65 Plus Index

105.34 1.42 2.40
 

 

Performance of Key Funds Classes:

MPF Fund Sectors#

Month-on-month%

Year-To-Date*

Asian Equity Fund

-3.75 -1.00

China Equity Fund

-3.54 -0.23

Europe Equity Fund

-0.41 1.10

Global Equity Fund

-0.62 2.26

Greater China Equity Fund

-2.40 1.53

Hong Kong Equity Fund

-3.62 0.24

Hong Kong Equity Fund (Index Tracking)

-4.16 -1.09

Japan Equity Fund

-4.51 -4.28

United States Equity Fund

1.80 6.24

Uncategorized Equity Fund

-1.53 0.79

Asia Bond Fund

0.46 1.40

Global Bond Fund

0.72 0.91

Hong Kong Dollar Bond Fund

1.29 1.85

RMB Bond Fund

-0.70 0.67

Guaranteed Fund

0.24 0.83

Mixed Assets Fund (21% to 40% equity)

-0.22

0.75

Mixed Assets Fund (41% to 60% equity)

-0.77 0.83

Mixed Assets Fund (61% to 80% equity)

-1.46 0.65

Mixed Assets Fund (81% to 100% equity)

-1.97 0.67

Default Investment Strategy – Age 65 Plus Fund

1.45 2.40

Default Investment Strategy–Core Accumulation Fund

0.50 2.50

Uncategorized Mixed Assets Fund

-1.37 1.13

MPF Conservative Fund

0.13 0.25

Money Market Fund – Other than MPF Conservative Fund

-0.75 0.09

#MPF FUND SECTORS BASED ON MPFA CLASSIFICATION
*MONTH-ON-MONTH PERFORMANCE IS CALCULATED FROM 20 January 2020 TO 20 FEBRUARY 2020; PERFORMANCE OF YEAR-TO-DATE IS CALCULATED FROM 18 DECEMBER 2019 TO 20 FEBRUARY 2020; THE TABLE COVERS ALL MPF CONSTITUENT FUNDS, PERFORMANCE IS CALCULATED USING AN EQUALLY WEIGHTED APPROACH AMONG ALL MPF CONSTITUENT FUNDS

  • SOURCE: CONVOY FINANCIAL SERVICES LIMITED
  • COMPILED BY THE CONVOY FINANCIAL SERVICES LIMITED
  • DISCLAIMER: THE CONTENT IS FOR REFERENCE ONLY AND DOES NOT CONSTITUTE ANY SUGGESTION AND OFFER FOR INVESTMENT. PLEASE DO NOT RELY ON THIS ARTICLE FOR YOUR INVESTMENT DECISION. INVESTMENT INVOLVES ELEMENTSOF RISK AND THE HISTORICAL DATA OF THE FUNDS IS NOT NECESSARILY AN INDICATOR OF THEIR FUTURE PERFORMANCE.CONVOY FINANCIAL SERVICES LIMITED ("CONVOY") HAS UNDERTAKEN REASONABLE EFFORT TO PREPARE THE CONVOY MPFINDICES. CONVOY CANNOT GUARANTEE THE ACCURACY

Photo: Ms. Bonita Leong, Group Chief Product and Strategy Officer, Convoy Global Holdings Limited, said that “Although the US and Europe market remains positive in Feb, we saw the new coronavirus start affecting the Greater China and Asia market, and weakening the confidence of investors globally. Fixed-income funds benefited from the unease, and supported the positive return of the hassle-free and lower cost DIS funds.

 

As mentioned previously, the uncertainty of the market's response to the spread of the virus is unavoidable. The uncertainties on the growth in the global economy continue to increase. However, as mentioned by recent MPFA's report on 2019's MPF investment performance, the 2.4% global economic growth in 2019, the slowest pace since the global financial crisis in 2008 did not slow down the MPF system, which registered a return of 12.2% in whole. For MPF members who are investing for long term growth in retirement savings, stay invested to capture the opportunity of buying low in the recent short term drop in the market.”

 

- End -

 

0.0.26-SNAPSHOT[Thu Dec 24 2020 13:20:38 GMT+0800 (HKT)]1f2e1ed747711627e8ac2555a8977d7850a7c1d1