Hong Kong’s pension scheme heads for first loss since 2018, prompting fund managers to seek wider investment scope

The 400 investment funds under the MPF scheme lost HK$14.8 billion (US$1.9 billion) in the first 11 months of 2021, according to the data provider MPF Ratings

The pension of each of the city’s 4.5 million MPF members shrank by about HK$3,288 during the period

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Hong Kong’s Mandatory Pension Scheme covers 4.5 million people in the city. Photo: Felix Wong

Published: 12:00pm, 24 Dec 2021Updated: 2:14pm, 24 Dec 2021

The Mandatory Provident Fund (MPF), Hong Kong’s compulsory retirement scheme, is set to register its first loss in three years due to the equities slump that wiped out value in the city’s stock market and the exchanges of Shanghai and Shenzhen.

The nearly 400 investment funds under the MPF scheme lost HK$14.8 billion (US$1.9 billion) in the first 11 months, according to the data provider MPF Ratings. The pension of each of the city’s 4.5 million MPF members shrank by about HK$3,288, a loss that is unlikely to be recovered, with Hong Kong’s key index still wallowing among the world’s top losers as the year draws to a close.

The MPF funds suffered a 0.4 per cent loss on average in the first 11 months. If the trend continues this month, the HK$1.2 trillion (US$153.8 billion) pension scheme will post its first yearly loss since 2018 when the funds fell 8.21 per cent on average.

Hong Kong and China equity funds were the worst performing MPF funds, losing 12.8 per cent in the year to November, according to MPF Ratings. A crackdown on Chinese tech companies, along with a slowdown in the property market and pandemic-driven economic slump contributed to a sell-off this year.

The Hang Seng Index has lost about 15 per cent so far this year through December 22, erasing about US$283 billion of market value from its 64 blue-chip members. The CSI 300 Index, which tracks the biggest companies listed in Shanghai and Shenzhen, fell 5.6 per cent. MSCI China, a gauge of more than 741 companies listed in onshore and offshore markets, slumped 23 per cent.