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First ten months of 2019: gross sales of funds drop marginally, but net sales soar

December 23, 2019

In the first ten months of 2019, the retail fund industry recorded net sales of US$15.4 billion, up by 21 times over the same period of 2018, according to the Hong Kong Investment Funds Association (“HKIFA”). 

On a gross basis, fund sales in fact saw a marginal drop from the same period last year, to US$79.5 billion.  However, as gross redemptions had shrunk by 23%, to US$64 billion, this enabled the industry to register robust net inflows of over US$15 billion.

 

Equity funds had consistently witnessed monthly net outflows throughout the first ten months, though the level had moderated in the second half of this year.

 

Balanced funds witnessed similar trends; but in October, they saw net inflows for the first time this year, at US$128.8 million.

 

Sales of bond funds had been very robust throughout the first ten months of this year.

 

Equity funds

 

Sales of equity funds had been lackluster for most of 2019.  On an aggregate basis, they saw net outflows of US$4.4 billion in the first ten months, way above the US$1.9 billion net outflows registered in 2018.  On a gross basis, the first ten months’ sales of all equity categories plunged 52% to US$12.7 billion. Though equity funds continued to see net outflows, gross redemptions had dropped. 

 

On a ten-month basis, Hong Kong equity funds saw a drop in gross sales by 52% to US$582 million.   On a net basis, this sector witnessed a reversal in flows – from net inflows of US$50.45 million registered the same period last year to net outflows of US$262.5 million this year.   Out of the first ten months, only two months saw net inflows, namely June (US$7.9 million) and August (US$20 million).  April saw the highest net outflows, at US$61.6 million.  By quarter, Q1 saw the heaviest net outflows, at US$115 million.  Outflows moderated to US$81.6 million in Q2; and further dropped to US$48.9 million in Q3.

 

Similar to HK equity funds, almost all other equity categories saw net outflows in the first ten months of this year.  The two which saw the heaviest outflows were Sector funds and China equity funds, registering outflows of US$873 million and US$795 million respectively.

 

Bond funds

 

In the first ten months, bond funds saw very robust inflows, at US$24.7 billion.  This is mainly attributable to a 156% increase in gross sales, to US$53.6 billion – accounting for 67.4% of the industry total.

 

Global, Asian and high yield bond funds, which suffered net outflows in 2018, made a strong comeback in 2019 with robust net inflows of US$15.8 billion, US$5.5 billion and US$1 billion respectively. 

 

Balanced funds

 

In the first ten months, the category attracted gross sales of US$12.1 billion, 59% down from the same period of 2018.  However, due to heavy redemptions, this category as a whole saw net outflows - at US$4.3 billion, vs inflows of US$7.8 billion a year ago.

 

On a gross basis, Global, Asia and other balanced funds all recorded a significant drop in sales, with the last category witnessing the greatest drop, at 78%.  Asia balanced funds is the only category that managed to record net inflows in the 10-month period.

 

Mr Bruno Lee, Chairman of HKIFA said, “the conclusion of the first phase of the China-US first trade agreement, as well as the election of the UK have helped  to bolster the sentiment of the global markets.  However, the trade war and its implications to global trade and economic growth; as well as the geopolitical tensions will continue to bring uncertainty to the market. 

 

“Against this background and as global interest rates are expected to stay at a relatively low level for some time, investors will continue to be keen to look for  investment options that can offer yields and enable them to better manage risks. 

 

“Mutual funds can offer products that can serve different needs - from capital preservation to yield enhancement; and from risk mitigation to capital growth.  They will continue to be an important vehicle to help investors navigate this challenging environment through effective diversifications in terms of geography, asset classes and strategies.”  (End)