Press Release

Global Assets Give Back Earlier Gains and RMB Depreciation Continues

 Uncertainties Loom and Nearly All Funds Record Negative Returns

Convoy MPF Index Down 1.48% Month-on-Month to 196.35 in October

 

(1 November 2016, Hong Kong) According to Convoy Investment Research Department, with global assets generally giving back earlier gains in October and the expected continued short-term weakness in the RMB, MPF performances were adversely affected, going from black to red. As of 27 October, the Convoy MPF Composite Index decreased by 1.48% month-on-month to 196.35, the Equity Index slid 1.89% month-on-month to 197.90 and the Bond Index decreased by 1.66% to 153.78. On a single-month basis, each employee incurred an average loss of HK$3,545 in October but has earned HK$7,408 for the year-to-date.

 

        Kenrick Chung, Director of MPF Business Development of Convoy Financial Services Limited, said, “While most fund classes had their heyday in September, things went the opposite way in October, indicative of a rather turbulent capital market. The imminent US presidential election and whether the US Federal Reserve is going to raise interest rates are all to be decided in two weeks’ time. MPF scheme members should buckle-up and be prepared for the shock. Although most fund classes slid in October, the Asia (Ex-Japan) Equity Fund has climbed for more than 9% year-to-date. Thus, the more risk-tolerant MPF scheme members could consider buying those funds on a monthly contribution basis. However, those close to retirement should hold back.”      

 

Funds went from black to red with only a minority delivering positive performance

Looking back in October, global market sentiment was dampened again by the likelihood of the Federal Reserve raising interest rates. Moreover, investors became more conservative as US Dollar remained strong. Except for the MPF Conservative Fund, all MPF classes declined on a monthly basis, among which the Asia (Ex-Japan and Hong Kong) Equity Fund saw the biggest drop, with 3.2% month-on-month. The drop in Asian Equity Funds was mainly due to the downturn of the stock markets in East Asia. However, the adjustment is believed to be temporary. Investors can wait until the adjustment is over and invest on those funds. The Asia (Ex-Japan) Equity Fund also dropped by 2.66%. As for the Lifestyle Fund - (>20%-40% Equity), it was down by a notable percentage mainly because of the drop in bond prices.  

 

Affected by the stronger Japanese Yen and US Dollar, the Japan Equity Fund and the US Equity Fund also decreased month-on-month by 0.43% and 0.91% respectively. The market saw the declining exchange rate of the EURO as beneficial to exports from Europe and supportive of the relatively stable performance of the European Equity Fund, which recorded only a slight 0.05% drop month-on-month. The consistently strong US Dollar and the Chinese authorities allowing the slow depreciation of the RMB resulted in a 0.93% month-on-month decline in the RMB and HKD Money Fund.  

 

Uncertainties expected to continue in the RMB market, Investors should cut holdings of related products

Convoy Investment Research Department pointed out that the US Dollar Index has risen to nearly 100, the impact of which is expected to be reflected gradually in the stock markets in Asia and the US. And, with coupon yield climbing, capital is expected to flow into the US Dollar Money Fund in the short term.

 

With the Chinese economy slowing down, the RMB continues to be weak. On top of the silent go ahead given by the People’s Bank of China for a gradual RMB depreciation, another reason for the weak RMB is the persistent strength of the US Dollar. The exchange rate of the RMB will fluctuate amidst a general downward trend and will only stabilize when its exchange rate to the US Dollar approaches the 6.8 level. Investors are thus advised to stay away from the RMB Money Fund and the RMB Bond Fund.

SOURCE: CONVOY INVESTMENT RESEARCH DEPARTMENT, WEBSITE OF MPFA AND THOMSON REUTERS LIPPER

COMPILED BY THE CONVOY INVESTMENT RESEARCH DEPARTMENT

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 ELEMENTS OF RISK AND THE HISTORICAL DATA OF THE FUNDS IS NOT NECESSARILY AN INDICATOR OF THEIR FUTURE PERFORMANCE. CONVOY ASSET MANAGEMENT LIMITED ("CONVOY") HAS UNDERTAKEN REASONABLE EFFORT TO PREPARE THE CONVOY MPF INDICES. CONVOY CANNOT GUARANTEE THE ACCURACY, COMPLETENESS AND CORRECTNESS OF THEIR CONTENTS

SOURCE: CONVOY INVESTMENT RESEARCH DEPARTMENT, WEBSITE OF MPFA AND THOMSON REUTERS LIPPER

COMPILED BY THE CONVOY INVESTMENT RESEARCH DEPARTMENT

SOURCE: CONVOY INVESTMENT RESEARCH DEPARTMENT, WEBSITE OF MPFA AND THOMSON REUTERS LIPPER

COMPILED BY THE CONVOY INVESTMENT RESEARCH DEPARTMENT