Hong Kong Pension Fund Faces 24% Loss This Year Due to China-Induced Downturn

Evaluation Losses of 51.7 Trillion Won This Year... Loss Exceeds 11 Million Won Per Person

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The Hong Kong Mandatory Provident Fund (MPF), which has invested mostly in the sharply declining Chinese and Hong Kong stock markets amid the economic downturn, has reportedly suffered a loss of about 24% this year. This amounts to a loss of approximately 11 million KRW per Hong Kong citizen.

According to major foreign media including Bloomberg on the 27th, the Hong Kong MPF recorded a year-to-date return of -24% as of the 24th. This is the lowest level since the global financial crisis in 2008. According to estimates by market research firm MPF Rating, the valuation loss amounts to 286 billion Hong Kong dollars (approximately 51.6716 trillion KRW). This translates to a loss of 62,400 Hong Kong dollars (about 11.27 million KRW) per subscriber.

Introduced in 2000, the MPF is a pension plan that workers are required to join. Both employers and employees must contribute 5% of the monthly salary each, and withdrawals are known to be difficult.

The reason for such losses is that a significant portion of the MPF’s fund assets is invested in the Hong Kong and Chinese stock markets, which have plummeted this year. The Hong Kong stock market, where mainly mainland Chinese companies are listed, has continued to perform poorly due to the sharp economic downturn caused by China’s 'Zero COVID' policy this year. The Hang Seng Index in Hong Kong has fallen 34.1% year-to-date as of this date, marking one of the largest declines among global stock markets.

In particular, investor sentiment was shaken once again last weekend as China’s next leadership was filled with close aides of President Xi Jinping. The Hang Seng Index dropped more than 6% on the 24th alone. Although it has slightly rebounded since, it remains nearly 5% lower compared to the beginning of the week.

The Mandatory Provident Fund Schemes Authority (MPFA) of Hong Kong stated in a press release, "The MPF is a long-term investment fund," and added, "Pension subscribers do not need to worry excessively about short-term market volatility."

This content was produced with the assistance of AI translation services.