This file photo dated to Nov 29, 2000 shows a reminder to the 01 December deadline for the mandatory provident fund (MPF) adorns the window of a bank in Hong Kong. (PHOTO / AFP)

Mandatory Provident Fund (MPF) members each lost HK$11,400 ($1,450) on average during the first three weeks of August as the funds tracking the Hong Kong stock market delivered poor performance amid concerns over the deteriorating condition of the Chinese mainland’s real estate sector, according to research firm MPF Ratings. 

During the period, the compulsory pension fund program recorded an average investment loss of 5.31 percent — the MPF’s worst monthly loss since September 2022 — eroding more than 80 percent of its 2023 year-to-date gain.

Hong Kong’s benchmark Hang Seng Index, which is made up mostly of companies from the Chinese mainland, has fallen nearly 10 percent since the beginning of August

After factoring in contributions, total MPF assets are forecast to reach around HK$1.099 trillion as of the end of August, up HK$47.6 billion since the start of the year. Each of the 4.69 million MPF members has, on average, an account balance of HK$234,100.

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The report, which was published on Thursday, came after the mainland’s real estate woes took a heavy toll on Hong Kong’s stock market. Mainland real estate behemoth Country Garden earlier this month missed interest payments on some dollar bonds. Adding to that worry is another distressed developer, China Evergrande, which sought bankruptcy protection in the United States as it wrestled to find tens of billions of dollars in debt settlements. 

Hong Kong’s benchmark Hang Seng Index, which is made up mostly of companies from the Chinese mainland, has fallen nearly 10 percent since the beginning of August. 

While the magnitude of August’s forecast loss may jolt the market, Chairman of MPF Ratings Francis Chung said that the Mandatory Provident Fund Schemes Authority’s (MPFA’s) governance measures and diversification-focused member education are having a positive effect.

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“Members appear to be heeding the MPFA’s message that diversification is key to consistent long-term investing,” Chung said, citing the authority’s low-cost and well-diversified Default Investment Strategy funds, which have gained approximately 8.5 percent market share since its 2017 inception. 

“Chinese property and overall economic concerns may impact the rest of the year; however, the MPFA has worked earnestly to put good governance principles in place. Such principles don’t directly affect financial markets, but they do promote accountability that minimizes the prospects of MPF scheme trustee-appointed fund managers having undue holdings in overly exposed companies,” he said. 

Since its inception, the MPF has on 13 different occasions previously recorded a monthly loss greater than 5 percent.

Contact the writer at evanliu@chinadailyhk.com