MPF spells for miserable

Ben Kwok March 16, 2022 12:13

Call it the Miserable, rather than Mandatory, Provident Fund.

The working population with Hong Kong stock exposure in the pension account like you and me must be screaming over the steep loss over past one month.

Sustained declines of the Hang Seng Index now put the Hong Kong stock market at a six-year low level ahead of the 25th anniversary of Hong Kong’s returning to China and in fact – as some local media put it – back to the level of financial tsunami in 2008.

Poor Hong Kong people suffered from the Fifth Wave that wiped out HK$1 trillion of market capitalisation this year and made people wonder if the stock crash would ever end.

The No.1 stock Tencent dipped below HK$300, the lowest in four years and more than halved from its one-year high while HSBC held relatively well with a share price of HK$49.2 and returned to the top five stocks with one trillion market capitalisation along with Alibaba Group, China Construction Bank and China Mobile.

There might be a short rebound but the index reflected the pessimism of Hong Kong’s poor pandemic control as well as the economic outlook amid the lockdown.

The chance of Carrie Lam’s getting a second term after July also fell sharply as the stock market fell 30 per cent under her administration since July 2017.

Misfortunes never come singly. It was all bad news – the renewed mainland Covid outbreak, the never-ending regulatory risks and the fear of US interest rate hike - all drove interests away from the small city.

But this is also the time for bargain hunting. Using the US stock market as an example, Schroders investment writer David Brett concluded that “the stock market has been quick to react to shocks of all types. Yet, history shows it has a tendency to bounce back strongly over time.

Falls associated with the global financial crisis, including the eurozone debt crisis in 2011, account for seven of the 10 worst days the US stock market has endured since 1989, Schroders noted.

The most severe was a 9 per cent fall on 15 October 2008 , as the credit crisis escalated into a full-blown financial crisis following the collapse of Lehman Brother. But, this was followed by a five-year return of 109 per cent, or an annual equivalent of 15.9 per cent.

Well, keep your mind off your pension statement. The good old days of the healthy stock and Hong Kong market would return one day – although frankly we do not know when.

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Ben Kwok

EJ Insight writer