Hong Kong's 2.5 million employees lost HK$6 on average for every HK$100 of their pension savings last month, wiping off all gains made earlier this year.
The Mandatory Provident Fund's poor results come as the cap for contributions goes up this month. From June 1, employees and employers will each pay up to HK$1,250 a month, from HK$1,000 before. The contribution rate for both sides remains unchanged at 5 per cent of the salary.
The 433 investment funds under the MPF lost an average of 6.03 per cent last month and 7.08 per cent in the three months of March, April and May. Losses in these three months almost wiped off the 8.72 per cent growth MPF funds saw in the first two months of the year, according to data provider Lipper. The Hang Seng Index lost 12 per cent in May as the euro zone crisis deepened and the mainland economy slowed down.
'Stock markets worldwide performed poorly in May and bond yields also stayed very low. It was hard for MPF investment funds to perform well in this gloomy market,' said Louis Tse Ming-kwong, director of VC Brokerage. 'Looking ahead, the worst may not be over because of the uncertainties over the European sovereign debt crisis. We are a long way from being out of the woods.
'However, employees may be better off taking a long-term view in their MPF investments and should not shift their investment choices due to short-term volatilities.'
The MPF, which had total assets of HK$390.74 billion as of the end of March, made an impressive turnaround by clocking up an 8.72 per cent gain in the first two months, after a dismal loss of 8.41 per cent last year. Lipper figures show MPF returns in the first five months of this year now stand at just 0.84 per cent.
All types of investment funds bled from the global downturn in May. Equity funds, the second-most popular MPF vehicle - accounting for 35 per cent of all fund assets - performed the worst, reporting a 9.39 per cent loss and an 11.22 per cent loss over the last three months.
Mixed-asset funds, a blend of stocks and bonds that are the most popular, representing 42 per cent of MPF assets, fell 5.73 per cent after gaining 7.17 per cent in the first quarter. Bond funds lost 0.88 per cent.