Fund managers blame HSBC's poor showing in the stock market for the lacklustre performance of the Mandatory Provident Fund (MPF) last month despite a relatively strong rebound in the Hang Seng Index.
The value of the city's pension fund edged up just 1.13 per cent in July despite improving fundamentals in the mainland economy and robust transactions in the local stock market of late, which drove the Hang Seng Index 1.83 per cent higher last month to 19,796.8 points.
Castor Pang Wai-sun, head of research at brokerage firm Core Pacific-Yamaichi, cited the sluggish HSBC stock as the reason.
'The bank is a major component of many equity and mixed-asset funds. In some cases, it takes up over 15 per cent of a portfolio's value, which is why it can easily weigh down a fund even when the stock market is doing well.'
Equity and mixed-asset funds - a blend of stocks and bonds - together made up more than three-fifths of the 435 investment funds under the MPF scheme. In July, equity funds gained 1.4 per cent while mixed-asset funds grew 1.15 per cent.
Shares in HSBC plunged to a one-month low of HK$61.10 in the middle of last month after a US Senate report accused the bank of laundering US$7 billion of drug money from its Mexican operations to its US business in 2007 and 2008. The stock rose back to HK$65.70 in the past few days.