Hong Kong employees who backed the city’s equities suffered their biggest losses last month when the city’s main pension fund was buffeted by the escalating US-China trade war and unprecedented civic unrest. The 42 Hong Kong equity funds under the Mandatory Provident Fund (MPF), the compulsory pension fund with HK$910.09 billion (US$116.02 billion) in assets for 2.9 million of the city’s employees and self-employed, lost 6.6 per cent of their value on average in August, according to Lipper, a unit of the financial data provider Refinitiv. The average loss in the Hong Kong stock funds, tracking a 7.4 per cent plunge in the key Hang Seng Index, was worse than the China fund’s 4.7 per cent drop, a 4.5 per cent decline in the Asia-Pacific excluding Japan fund, and bigger than the 2.9 per cent dip in the global equity fund, Lipper’s data showed. The MPF’s most popular asset allocation option, chosen by 37 per cent of all employees, did worse than the 1.8 per cent decline seen across the pension fund’s 416 funds. Bond funds returned 1.9 per cent, as investors took shelter in fixed-income financial instruments amid declining interest rates and a turbulent equities market. “Bonds provide a safe haven in times of volatile stock markets, due to the escalating trade war between the US and China,” said Elvin Yu, chief executive of pension consultancy Goji Consulting. “US equity funds are still in favour given the decent economic data in recent days. While some analysts are expressing concerns of a possible US recession, it won’t come any time soon.” Hong Kong’s economy, on track to a technical recession in the third quarter as it’s been squeezed by a year-long trade war between the world’s two largest economies, has been put under further pressure as 13 weeks of street rallies since June have deterred visitors and investments in the city. The protests have hurt the local stock market, forcing at least three companies to shelve a combined US$11.05 billion in initial public offerings (IPOs), in a setback for Hong Kong’s race to retain its crown as the world’s fundraising capital. The MPF’s Hong Kong equity funds lost 2.1 per cent in the three months since June, when an estimated 1 million people marched on the streets to oppose a controversial extradition bill. Even though the city’s Chief Executive Carrie Lam Cheng Yuet-ngor declared the bill “dead,” her reluctance to withdraw it has fuelled more rallies. “MPF is long term savings and accumulation vehicle. There should be no need to be too concerned by short term fluctuation. Chasing the last market to do well can often lead to even worse returns than taking no action,” said Stewart Aldcroft, chairman of Cititrust. The MPF returned 1.6 per cent in the three months since June, as investments in international stocks and bonds offset losses in Hong Kong stocks. The US equity funds returned 5.4 per cent, while the global equity funds gained 2.2 per cent and global bond funds advanced 3.4 per cent from June to August. The Hong Kong funds were the second-worst performer, surpassed only by the 7.8 per cent loss in the MPF’s South Korea fund during the three-month period. “Diversification would be a good strategy but MPF members should avoid Europe and Japan stock funds,” Yu said. “The former faces various geopolitical issues and the latter faces a strengthening yen. The Asia-Pacific excluding Japan stock funds are also in trouble as there are trade disputes between South Korea and Japan, while mainland China is also facing an economic slowdown.”