Convoy MPF Composite Index recorded 235.72 in March with a decrease of 1.85% month-on-month

Employees suffered a lost in the first quarter of 2018

 

 (3 April 2018, Hong Kong) As of 28 March, the Convoy MPF Composite Index reported 235.72, with a decrease of 0.26% from the beginning of this year and 1.85% on a monthly basis.  The Bond Index performed well with an increase of 0.68% month-on-month.  According to MPFA’s announcement that the number of MPF scheme members as of December 2016 was 4.19 million, each employee lost on average $677 in the first quarter of 2018.

 

The Fund Research Department of Convoy Asset Management Limited indicated that because of the trade tension between US and China, the global stock market continued to fall in March.  The Facebook data leaks raised the supervisory concern about technology stocks, resulting in a decrease in the relevant stocks.  It also aroused risk aversion sentiment as funds avoided in investing in high risk assets.  The US stock market fell significantly while the US equity funds recorded a decrease of 3.64% in March.  Consequently, the Equity Index recorded a drop of 2.56% month-on-month to 256.66.  Apart from the poor performance in the US stock market, the Japanese stock market was also affected by a number of negatives news, including the imposition of tariffs on steel and aluminum products, and the strengthening of Japanese Yen due to the fall of global risk appetite.  Since the Nikkei Index includes a significant proportion of export companies, the Japanese stock market fell sharply in March.  The performance of Japanese equity funds was the second-poorest in March with a decrease of 2.9% and 1.97% on a monthly and quarterly basis respectively.

 

Drawing lessons from the history, like the market reactions on the US imposed trade protection policy to Japan in the 80s and the increased tariff of steel import by 30% in 2002, the recent implementation of the protection policy by the US will continue to drive the market to avoid risk in the short term.  Investors may wish to pay attention to those Asian countries whose economies are driven by domestic demand as they will be less affected by the protection policy.  Besides, they can consider RMB bonds and RMB money market funds.

 

Kenrick Chung, Director of MPF Business Development of Convoy Financial Services Limited, said although geopolitical risk seems to be eased, the trade war between the US and China has created great market volatility.  The MPF scheme members should be more cautious in risk management.  Those who have higher risk appetite can consider investing in China equity funds as the domestic demand in China has become a new driving engine while voices around the world against trade war are increasing.  Those who have lower risk appetite can consider investing in soft guarantee fund as it can achieve the balance between aggressiveness and defensiveness, if specific guarantee criteria are met.

 

Summary of Performance of MPF Key Fund Class in March:

Equity Fund:

  • Asia-Pacific (excluding Japan) equity funds performed well relatively with a decrease of 1.29% month-on-month, an 0.44% increase January-to-date
  • US Equity Fund performed the worst, recorded a 3.64% decrease month-on-month and a 1.69% decrease January-to-date

Bonds Fund:

  • Global Bond Fund performed well, up by 0.93% month-on-month and increased by 1.06% January-to-date
  • HKD Bond Fund performed the worst, recorded a decrease of 0.10% month-on-month and a decrease of 0.96% January-to-date

Default Investment Strategy:

  • The Core Accumulation Fund of the DIS fell by 1.48% month-on-month, up by 8.72% April-to-date
  • The Age 65 Plus Fund of the DIS increased by 0.09%, up by 2.92% April-to-date