Asia’s fund selectors like slumping Chinese equities

Asset Class in Focus

In the next 12 months, research suggests that allocations to China equity funds will be up while US and European equity product exposure will decrease, according to data collected by FSA.

The MSCI China Index is down 16% year-to-date and fund selectors apparently see the decline as a buying opportunity.

Participants in the Fund Selector Asia Asset Class Research, a quarterly survey of long-term (12 month) sentiment of fund selectors in Hong Kong, Singapore and Thailand, have shown an increasing interest in buying Chinese equity funds in September 2018.

Long-term sentiment toward Chinese equities

Source: FSA

The question FSA posed was: “In the next 12 months, will you increase your asset allocation to global emerging market equities, decrease it, maintain it at the current level, or you don’t invest in it?”

In June, fund selectors were equally divided as to whether they will be increasing or maintaining Chinese equities. In September, more than half indicated that they will be increasing investments in the asset class, although a slightly higher number of respondents said they will be decreasing it.

The net sentiment, which FSA measures by subtracting the number of sellers from the number of buyers, was positive and the highest for Chinese equities during the period. It indicates that more fund selectors plan to increase their allocation than to decrease.

Following Chinese equities in terms of net sentiment is absolute return or hedged strategies, with at least half of the fund selectors surveyed indicating that they will be increasing allocation in the asset class.

Long-term sentiment toward absolute return/hedged strategies

Source: FSA 

US and European equities

On the flipside, sentiment was lowest for US equities, indicating that more fund selectors plan to reduce their allocation.

The asset class also saw the largest quarterly shift in investor sentiment, with the number of respondents wanting to buy into the asset class down by 50% and the number of respondents up by the same percentage.

Long-term sentiment toward US equities

Source: FSA

European equities had the second lowest ranking in terms of sentiment among fund selectors. However, rather than selling, the prevailing action is to hold for the next 12 months.

Long-term sentiment toward European equities

Source: FSA

 

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