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Fund net sales up 260% in the first half of 2017

August 15, 2017

Retail funds sales in Hong Kong enjoyed a strong rebound in the first half of this year, with net sales surging 260% to US$4.8 billion from the same period of 2016, according to the Hong Kong Investment Funds Association (“HKIFA”). They also surpassed the net sales recorded in the full year of both 2016 (at US$3.1 billion) and 2015 (at US$3 billion).

For the first six months of 2017, gross sales also enjoyed healthy growth – up by 51% to US$44.1 billion year-on-year (“YoY”). 

Bond funds continued to be the most popular category across all fund types, a trend seen since the beginning of 2016.  However, net sales fell 14% to US$5.6 billion amid more redemptions in certain sectors, such as global bond funds.

Balanced funds saw YoY gross sales nearly triple to US$12.4 billion from US$4.3 billion a year ago, and the first time balanced fund sales exceeded those of equity funds (based on yearly data since 2006).  Net inflows in the first half had also turned positive YoY and reached US$3.1 billion.

Despite the rally across globe stock markets in recent months, equity funds recorded net redemptions for 16 months in a row, though net outflows had narrowed to US$3.8 billion from US$4.3 billion a year earlier.   Gross sales soared 30% YoY to US$11.5 billion, thanks to decent inflows into Asia regional (excluding Japan) and sector equity funds.

Equity funds

During the first half of this year, only sector funds recorded net inflows, which totaled at US$269 million, compared to US$123 million from the same period of 2016.

Net outflows were seen mainly in China equity funds; followed by Asia regional (excluding Japan), international, and Hong Kong equity products. 

China equity funds saw net outflows of US$931 million in the first half, versus US$629 million a year ago.  Despite the MSCI announcement to include A-shares into its emerging markets indices on June 21, the category saw strong gross redemptions of US$412.9 million in June, which is the highest since the A-share market crash in the summer of 2015.

In May, European regional market (excluding Eastern European countries) funds reversed the net outflows trend for the past 15 months.  The European markets had been plagued by Brexit and concerns about the results of elections in a number of European countries.   But as economic outlook improves and as the election results to a certain extent remove uncertainty, this category of European funds saw net sales of around US$130 million in the second quarter.

Bond funds

Within the five bond fund categories, high-yield bond funds had the strongest net sales of US$2.4 billion throughout the first half, driven by steady monthly net inflows, beating the full year 2016 figure of US$1.5 billion.

Asian bond funds came second with US$1.9 billion of net subscriptions, while global bond funds came third with US$996.7 million.

The US bond funds sector is the only category which saw net outflows, totaling at US$43.2 million in the first half, although it managed to turn back to net inflows in May and June.

As sentiment towards Europe improve, European bond funds also reversed the 7-month consecutive net redemptions and registered net inflows in May and June, of US$50.2 million and US$191.9 million, respectively.

Balanced funds

The category as a whole recorded US$3.1 billion of net inflows in the first half, and has posted positive monthly net sales since August 2016.  However, on a quarterly basis, net inflows shrank by 54% in the second quarter to US$973.2 million from US$2.1 billion three months earlier.

Since November of 2016, HKIFA has started to provide the breakdown of balanced funds – subdivided into global, Asia and others categories.  Amongst the three, Global balanced funds had the highest net inflows of US$1.6 billion in the first half.

Comments

Mr. Arthur Bacci, Chairman of HKIFA said, “The significant improvement in net sales during the first half of the year is underpinned by the robust performance of various equity and bond markets and improving economic outlook globally.”

”As central banks synchronize their efforts to remove monetary accommodation, investors should be alert to potential impacts on equity and bond valuations.  The currency market may also have greater impact on returns,” Mr. Bacci concluded.

HKIFA has 67 fund management companies as full and overseas members.  It has 58 affiliate and associate members which include lawyers, accountants, trustees and other professionals that are involved in the creation and administration of funds. 

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