OnePlatform MPF Indexes increase across the board

As of 20 July, OnePlatform MPF Composite Index was 234.72, with a 1.41% month-to-month increase. In July, the market was still plagued by high inflation and economic recession concerns, but investors were less reactive as before. European and United States stock markets rebounded this month, making the OnePlatform MPF major indexes all recovered. OnePlatform MPF DIS Core Accumulation Index rose the most, with a 3.39% month-to-month increase. OnePlatform MPF DIS Age 65 Plus Index rose by 2.07% month-to-month; OnePlatform MPF Equity Index rose by 1.84% month-to-month; OnePlatform MPF Bond Index rose by 0.69% month-to-month. Year-to-date, all OnePlatform MPF indexes still recorded double-digit losses.

Summary of MPF Fund Performance in July

Equity Funds:

After experiencing the worst first half in 50 years, the S&P 500 climbed 7.76% in July. The Nasdaq Composite and Russell 2000 indices performed particularly well, returning 10.18% and 9.68%, respectively. Volatility is also subsiding, with the CBOE Volatility Index spending the majority of the month below 30, the high-volatility threshold, and edging closer toward the more stable 20 mark. United States Equity Fund increased 7.94% while Global Equity Fund increased 4.64% in July. 

Europe is contending with numerous challenges that are stirring fears of stagflation, but investors are less reactive than in recent months. Many of the continent’s largest indices saw gains. Europe Equity Fund increased by 1.71% over the month.

With Covid-related restrictions and supply disruptions subsiding, confidence in Japan’s economy is improving. Further, it is one of the few developed nations maintaining loose monetary policies without significant inflation. In July, the Nikkei 225 index climbed 7.41% and TOPIX rose 2.01%. Japan Equity Fund came close to erasing its June losses, at the return rate of 4.70%. 

Markets in China and Hong Kong fell back in July, with the CSI 300 dropping 0.97%, the Shanghai Composite falling 0.32% and the Hang Seng Index down 1.29%. Fund losses are comparatively lower when compared to the volatility of the first six months of 2022: Asia Equity Fund declined 0.57%, China Equity Fund declined 1.43%, Greater China Equity Fund declined 1.66% and Hong Kong Equity Fund decreased by 0.96%.

Mixed Assets Funds:

Mixed portfolios tilted towards equities outperformed in July. MPF Mixed Asset（21% to 40% equity）and MPF Mixed Asset（41% to 60% equity）rose by 0.86% and 1.01% respectively over the month, while MPF Mixed Asset（61% to 80% equity）posted 1.22% and MPF Mixed Asset（81% to 100% equity）recorded a higher 1.58% return.

Meanwhile, MPF Conservative Fund and Money Market Fund – Other than MPF Conservative Fund continued hovering around the flat mark with returns of 0.00% and -0.32%.

Market review in July

Market reported that recession-related anxieties gained traction entering the second half of 2022 as economic, political and environmental issues compound. Although Covid-related supply bottlenecks are subsiding, a particularly contagious omicron sub-variant is spurring a new wave of infections, with the WHO Director General warning that the pandemic “is nowhere near over”. Meanwhile, the war in Ukraine continues to hamper worldwide food and energy supplies, driving inflation to record highs in parts of the world. And to make matters worse, heatwaves in the northern hemisphere are complicating the energy crisis further.

US FED expected to keep raising rates

Inflation in the United States continued on its upward trajectory, reaching an above-forecast 9.1% in June – the highest rise in more than four decades. Economic growth is faltering, with the July S&P Global US Composite PMI coming in at 47.5 in July. As the Federal Reserve continues to tighten and the balance sheet shrinks, fears of a recession abound. Indeed, more interest hikes are in store as the Fed is set on prioritising stability over growth. Recently, Fed Chair Jerome Powell said 2% inflation was the bank’s overall goal, adding that the US economy is positioned well enough to handle tighter policies although the likelihood of a recession is “certainly a possibility”. 

High inflation rate stirring up feelings of dissatisfaction among Unions

Europe is also facing runaway inflation. Prices may battle more upward pressure as the Euro broke parity with the dollar for the first time in two decades and as uncertainty surrounds the availability of energy amid a record-breaking heatwave and an approaching winter. Consequently, the European Commission increased its 2022 inflation forecast from 6.8% to 8.6%. In an effort to combat soaring prices, the European Central Bank at last hiked an interest rate by 50 bps. Meanwhile, inflation in the UK is surging – 9.4% in June – and the GfK Consumer Confidence indicator remained at an all-time low. Further, as wage increases trail inflation and real earnings decrease, multiple unions are threatening strike action.

Bank of Japan maintains its existing monetary policySimilar to Europe, Japan is facing power shortages, exacerbated by the country’s worst heatwave. On the monetary front, the Bank of Japan maintains its monetary policy. The bank’s governor, Haruhiko Kuroda, said it has “no intention at all” of increasing rates for the time being. Meanwhile, China saw exports increase 179% year-on-year as supply constraints ease and overseas firms rebuild inventories. Both the Caixin China General Manufacturing and Services PMIs increased in June, passing the 50 thresholds into growth territory.