Mounting U.S.-China trade tensions have spurred a dramatic reshuffle in Hong Kong's Mandatory Provident Fund (MPF) investments, with investors rapidly retreating from U.S. equities and pivoting to conservative assets and gold, as fears of a prolonged tariff war and U.S. economic instability intensify.
MPF Data Reveals Flight from Risk
According to MPF consultancy GUM's April 16 report, U.S. stock funds suffered a staggering HK$5.975 billion net outflow in March alone, the worst-performing asset class this year, amid concerns over Washington's escalating tariffs and recession risks. Global equity funds and mixed-asset funds (80%-100% equities) followed with outflows of HK$712 million and HK$475 million, respectively. Year-to-date, U.S. funds have bled HK$5.169 billion, while Hong Kong equity funds saw HK$3.323 billion in net redemptions.
Notably, Hong Kong stocks showed tentative recovery signs in March, with index-tracking funds attracting HK$1 billion in net inflows, signaling cautious optimism among MPF members. Conversely, risk aversion dominated broader trends: Conservative Funds drew HK$3.263 billion in March (totaling HK$8.984 billion for Q1), while Guaranteed Funds and the "default" Core Accumulation Funds added HK$1.187 billion and HK$1.964 billion, respectively.
Gold Overtakes U.S. Assets as Safe Haven
As U.S. Treasury yields spike and global investors dump dollar-denominated assets, gold prices soared to a historic high above US$3,300 per ounce, driving rallies in gold mining stocks. Chifeng Gold (6693), a recent March IPO, surged 21.2%, while Zhaojin Mining (1818) and Shandong Gold (1787) jumped 8.5% and 7.4%, respectively. David Chao, Invesco's Asia-Pacific strategist, warned that the U.S.'s high debt levels and foreign sell-offs of Treasuries have undermined confidence: "Gold is now the preferred hedge. Even if trade deals emerge, the damage to U.S. debt markets may be lasting."
Hong Kong Market Swings on Tariff Threats
The Hang Seng Index tumbled over 400 points on April 16, snapping a six-day rally, after the U.S. threatened 245% tariffs on select Chinese imports. Tech giants led losses: Meituan (3690) plunged 8.1%, erasing 107 points from the index, while Alibaba (9988) slid 4.1%. HSBC (0005) and property stocks bucked the trend, rising 1.2% and 2.3%, respectively, as investors rotated into defensive sectors.
Analysts Urge Calm Amid Panic
GUM's Martin Wan cautioned MPF members against knee-jerk reactions: Panic selling locks in losses and risks missing rebounds. He noted that over HK$11 billion has shifted to conservative assets this year, reflecting deep anxiety over U.S. policy volatility. Meanwhile, U.S. tariff threats - now targeting up to 245% on Chinese goods - are seen as a political gambit ahead of the 2024 election, but economists warn they risk inflating costs for American consumers and further destabilizing global trade.
As the U.S. and China dig in, markets brace for prolonged turbulence, with gold and defensive plays eclipsing traditional havens. Investors now weigh whether escalating rhetoric will force a negotiated truce or push the world's largest economies into irreparable economic divorce.
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