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Nelson, honourable guests, ladies and gentlemen, good morning. It’s my pleasure to speak to you today at the annual conference of the Hong Kong Investment Funds Association (HKIFA). The theme of this conference is “Re” – it’s probably the shortest theme ever, and I like it. With this in mind, I title this speech “Reflect, Reset and Refocus – Game Plan for Hong Kong as an Asset Management Hub”.
Reflections on market challenges in 2022
Let’s start with Reflections. The investing landscape saw a tectonic shift in 2022 and asset managers now operate in a profoundly different environment from the past two decades. The abrupt end to zero interest rates and quantitative easing shook the markets, and this was compounded by the lingering impact of the pandemic. In many developed economies, interest rates soared to tame the inflation spurred by commodity prices and supply bottlenecks. Add to these a war in Europe, lockdowns in China and continuing geopolitical tensions.
Through most of 2022, market players found themselves in uncharted territory. Both equities and fixed income were hit hard, sending valuations lower for most public fund portfolios. Equities saw the worst year since 2008, losing 20% in value. Bond indices also recorded double-digit losses. A typical investor long in both would have lost money, regardless of allocation. Our Mandatory Provident Fund painted a similar picture, as the net asset value (NAV) of constituent funds fell more than 10% in 2022, according to the data from the MPF Schemes Authority.
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