As of 19 January, The OnePlatform MPF Composite Index was 239.85, with a 5.67% month-to-month increase.

The market has a good start in 2023. The inflation rate and the pace of the central bank’s interest rate hike show signs of slowing down, and the restart of the China’s economy has led to market optimism, driving the overall OnePlatform MPF index to record a month-on-month increase in January. OnePlatform MPF Equity Index rose the most, with a 8.16% month-to-month increase; OnePlatform MPF DIS Core Accumulation Index increased by 3.54%; OnePlatform MPF Bond Index increased by 2.88%; OnePlatform MPF DIS Age 65 Plus Index increased by 2.17%.

Summary of MPF Fund Performance in January

Last year was the worst for equity markets since the Great Recession, as runaway inflation, reactive monetary tightening and the Russia-Ukraine war created upheaval. Those challenges are still very much present, and the World Bank lowered its global growth forecast to 1.7% for 2023, with advanced economies predicted to grow by just 0.5%. However, markets have steadied significantly and are exhibiting a strong sense of optimism. Global Equity Fund increased 4.62% in January.

Equity Funds:

US markets began 2023 on a positive note, with the S&P 500 climbing 2.13% and the tech-heavy Nasdaq Composite up 2.90% despite more announcements of staff cuts in the sector, most recently by Amazon, Microsoft and Alphabet. Given recession-related concerns, the Dow Jones trailed but still posted positive growth of 0.88%. Overall, United States Equity Fund rose 3.01% over the month.

The recent downwards trend of inflation is driving market optimism in Europe, as is the hope that the continent has largely avoided energy shortages as it starts heading towards spring. Regional indices saw impressive returns, including the FTSE 100 (5.24%), the German DAX (7.01%), and the French CAC 40 (7.39%). Meanwhile, the Euro STOXX 50 and 600 indices returned 7.43% and 5.77% respectively. Europe Equity Fund climbed 8.12% in January.

Despite China’s rough start to 2023, once the peak of infections passed, optimism about the news of open borders took hold. And although last year’s growth data did not meet expectations, the Chinese government has reiterated that it will support consumption, online platforms and the property sector. Over the month, the CSI 300 was up 6.75% and Hong Kong’s Hang Seng Index climbed 11.88%. Likewise, the region’s funds started the year on a positive note. China Equity Fund, Greater China Equity Fund, Hong Kong Equity Fund and Asian Equity Fund rose by 11.54%,10.48%,12.51% and 7.52% respectively.

Bond Funds:

Fixed income markets benefited from positive inflation and job data in United States and Europe, as well as China opening its borders. Meanwhile, more cautious investors see fixed income as a safe haven amongst a sea of economic and political uncertainties. 10-year Treasury yields fell 0.19 percentage points over the month, Bunds dropped 0.14 pps, and gilt yields are down 0.22 pps. Japan, meanwhile, saw a sharp increase in sovereign debt yields as it raised the cap on 10-year government bonds to 0.5%. Global Bond Fund increased 2.92% in January.

Mixed Assets Funds & Money Market:

Mixed-asset funds gained from positive returns across asset classes, with equity-heavy funds benefitting particularly well from strong performances in global stock markets. Mixed Assets Fund (21% to 40% equity) returned 4.26%, while Mixed Assets Fund (81% to 100% equity) rose by 7.64%.

Meanwhile, money market sectors – predominantly comprising short-term borrowings and deposits – continued to show relatively little movement, with returns of 0.25% and 1.94%.

Monetary Fund (IMF) Managing Director has said that the agency believes global growth has bottomed out and that although 2023 will be a tough year, downward trends will reverse heading into 2024. The World Bank, however, is less hopeful, and warned that the global economy is “perilously close to falling into a recession”.

Slowdown in US inflation

In the United States, last year’s efforts by the Federal Reserve to quell inflation appear to be paying off. Price increases slowed from 7.1% in November to 6.5% – the lowest reading in over a year. Core inflation was also on a downward trajectory. The news drove up consumer sentiment significantly in January, although retail sales contracted by 1.1% in December and the S&P Global US Manufacturing PMI slowed considerably – stoking fears of a recession. On the political front, after a record-breaking number of voting rounds, Republican Kevin McCarthy has been elected Speaker of the US House of Representatives, which will make it harder for Democrats to pass their agenda as they begin gearing up for the next election. The United States once again hit its debt ceiling which will need to be raised or suspended within the next few months.

ECB hints to stay the course on rate hikes

United Kingdom remains strongly impacted by rising prices, with strikes continuing into New Year. The Bank of England is thus under additional pressure to rein in inflation, which subsided to 10.5% in December although core inflation remained at 6.3%. Consumer confidence fell significantly, highlighted by the 5.8% drop in retail sales compared to a year earlier – the biggest December drop since records began. Inflation in Euro area returned to single digits thanks, in part, to a 44% drop in natural gas prices, although core inflation in the euro area increased slightly to 5.2%. Speaking at the World Economic Forum’s Annual Meeting in Davos, President of the European Central Bank (ECB) Christine Lagarde stressed the ECB’s determination to bring inflation back to the target 2% in a timely manner. Indeed, according to minutes from the bank’s December meeting, a large number of members voted for a larger hike than the latest half-percent increase.

Kuroda retirement casts an uncertainty over Japan monetary policy

Japan continues to buck the global trend, maintaining ultra-loose monetary and fiscal policies despite core inflation hitting a 40-year high of 4%. Despite regulators’ commitment to growth-supporting policies, uncertainty is growing: Bank of Japan governor Kuroda Haruhiko’s term is coming to an end in coming April. In China, the economy had a lackluster fourth quarter which saw growth remain flat over the last three months of 2022. Over the year, growth came in at 3%, below the 5.5% goal set in March. However, trade surplus over the year increased by a record-breaking 31%.

#NOTE:

1. Insurance and MPF schemes brokerage services are provided by OnePlatform Wealth Management Limited (respectively an Insurance Broker Company with HKIA Licence No. FB1452 and a Principal Intermediary with MPF Registration No. IC000579).