November 15, 2013
Equity funds attracted US$6,602.62 million of gross inflows in the third quarter, accounting for 40.6% of the industry gross sales. This is the first time in this year that it came first in quarterly sales, according to the Hong Kong Investment Funds Association (“HKIFA”).
They were followed by balanced funds and bond funds, which registered gross inflows of US$4,724.92 million and US$4,166.31 million respectively, accounting for 29.1% and 25.6% of the industry gross sales.
On a net basis, equity funds also had fared better – they attracted the highest net inflows of US$1,846.5 million in Q3, 2.5 times higher than Q2.
Out of the 16 equity categories, eight registered net inflows in the third quarter of this year. International equity funds came first by pulling in US$1,384.59 million. This was followed by European regional market (excl. Eastern Europe) funds, but with much smaller inflows, at US$357.44 million only.
Out of the 8 sectors that saw net outflows, China equity funds saw the greatest outflows, at US$239.31 million. Asian Single Market (non Japan/China/HK) equity funds came second with US$137.74 million of outflows. Both China equity funds and Asian Single Market equity funds suffered increase in net outflows by 72.1% and 11.6% respectively when compared with Q2, while Asian Single Market equity funds even witnessed continuous net outflows in the first three quarters.
On a YTD basis, aggregate gross sales of equity funds reached US$15,192.22 million, up by 97% from the corresponding period of 2012.
On a net basis, equity funds staged a comeback by attracting net inflows of US$2,898.63 million in the first nine months, whereas it suffered net outflows of US$978.59 million in the same period of last year.
On an industry-wide basis, the fund industry registered gross and net sales of US$56,413.17 million and US$10,689.52 million respectively in the first nine months of 2013. They were up by 42.4% and 10.8% respectively over the corresponding period in 2012.
The growth in gross sales was mainly registered in the first two quarters. The fund industry registered gross sales of US$19,963.81 million and US$20,185.58 million in Q1 and Q2 respectively.
However, gross sales had dropped in the third quarter – down by 19.4% vs. Q2 to US$16,263.78 million. But the industry still managed to register net inflows of US$235.86 million. The drop in Q3 was primarily due to the lackluster sales of bond funds. Compared with Q2, gross sales of bond funds dropped by about 49% to US$4,166.31 million and they witnessed net outflows – the highest of all - at US$2,778.81 million. Bond funds have witnessed net outflows for four consecutive months since June this year.
In Q3, five out of the six bond sectors saw a drop in gross sales and registered net outflows. Emerging markets bond funds suffered the largest drop in gross sales, by 88.8% to US$69.14 million. But on a net basis, it was the global bond funds category which witnessed the highest net outflows, at US$1,593.65 million. This was followed by emerging market bond funds, which pulled out US$605.37 million. Only European bond funds managed to register an increase in gross sales and saw net inflows, albeit meager (US$0.35 million).
Balanced funds managed to attract sizable inflows in the first nine months of 2013, gross sales amounting to US$18,046.67 million, almost four times over that of 2012. Net sales rose even more, by 6.1 times, from US$1,376.79 million to US$9,726.79 million.
Balanced funds witnessed gross inflows of US$4,724.92 million and net inflows of US$1,254.23 million in Q3. But compared with Q2, gross sales and net sales had shrunk by 32.9% and 68.6% respectively.
Commenting on fund sales, Mr. Lieven Debruyne, HKIFA Chairman said, “Q3 saw a fundamental shift in demand from bond funds to equity funds. Uncertainty in markets, initially caused by the Fed announcement regarding tapering of their bond buying program, has made investors more wary regarding the return prospects of bond funds. At the same time, equity markets, especially developed equity markets, continued to show strong performance. This resulted in stronger demand for equity funds compared to previous quarters. Overall though funds sales were down for the quarter, indicating a general lack of confidence among investors. However extraordinary strong sales in the 12 months prior to Q3 might have played a role as well”.
HKIFA has 79 fund management companies as full/overseas and affiliate members. It has 50 associate members which include lawyers, accountants, trustees and other professionals that are involved in the creation and administration of funds.