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Asia fund selectors turn to gold

Asia's third-party fund buyers have joined the gold rush, but retain their risk appetite, according to Last Word Media research.

There was a 70% shift in net buying sentiment towards the yellow metal among the region’s fund selectors in the third quarter of his year, research by Last Word Media found.

Indeed, none of the around 250 top decision-makers intend to reduce their gold allocations, reaffirming a strong commitment to an asset class that has risen in value by up to 30% since the start of the year, according to S&P Global Market Intelligence.

The quarterly survey, conducted by Last Word Media, identifies likely investment flows across 24 asset classes by asking fund selectors in Hong Kong, Singapore and Thailand for their expected allocations over the next 12 months.

Gold is typically considered a hedge against inflation – and it is significant that the demand among survey respondents for inflation-linked bonds is looking much stronger than in the previous three quarters.

As Ned Naylor-Leyland, manager of the Merian Gold and Silver Fund told FSA earlier this year, the unprecedented central bank monetary and government fiscal stimulus packages launched in response to the Covid-19 pandemic has provided conditions for the metal to shine.

The key determinant for the gold price are expectations about the US dollar and the trajectory of real (that is, inflation-adjusted) interest rates, he explained.

In contrast to the second quarter of this year, appetite for China equities, which have enjoyed a strong performance since the low point in global markets on 23 March, diminished between 30 March and 30 September.

Net sentiment for the asset class remains positive, but ranked behind global equities, private equity, local stock markets, absolute return and hedge fund strategies and domestic Asian fixed income, as well as gold and property, according to Last Word Media findings.

“The big shift is the sharp growth in fund selectors reducing their weightings in Chinese equities and pan-Asia equities. It looks like that slack has been taken up by an even stronger shift in demand – this time positive – for local equities,” noted the authors of the research.

Source: Last Word Media Research, October 2020

Intraregional differences

However, there are variations between the Asian countries’ fund selectors surveyed by Last Word Media.

In particular, there are differences in their attitudes to cash. Almost all Thai fund buyers are planning to move out of cash, a high proportion in Singapore intend to make the same re-allocation, but in Hong Kong there is a broad balance between cash hoarders and divestors, according to the research.

Among equity markets, Chinese and local equities are most liked in Hong Kong, while Thai selectors prefer global equity funds, and in general, are “noticeably more bullish on equities than their peers in Hong Kong and Singapore”.

As for fixed income products, local currency Asian bonds are the most popular among selectors in Hong Kong and Singapore, but not in Thailand, where fund buyers have a tilt towards hard currency emerging market bonds.

Finally, in sharp contrast to European fund selectors, Asian respondents have not lost their taste for absolute return and hedge strategies; multi-asset and unconstrained bond funds are also in demand.


Part of the Mark Allen Group.