While some equity sub-segments were able to generate positive returns despite the difficult year last year, all fixed income sub-segments classified by FE fundinfo available to Hong Kong retail investors posted negative returns.
Hong Kong dollar bond funds was the only category that narrowly avoided a double-digit loss last year, with a cumulative US dollar return of -8.43%.
According to FE fundinfo, there are 15 funds within the category and the top three performing Hong Kong dollar funds were China Universal Asset Management’s Hong Kong Dollar Bond Fund, the BOCHK HK Dollar Income fund and the Allianz HKD Income fund.
All three funds have their largest asset allocation to the financial sector and a bias towards corporate debt rather than sovereign bonds.
Last year’s best performing category, renminbi-denominated bonds, remained one of the leaders this year.
The sub-segment generated a cumulative US dollar return of -10.03% for the year.
The best performing funds were all ETFs tracking China treasury bonds, while active funds investing in both high yield and investment grade have performed worse.
The high yield sector also performed relatively better than its peers, with both global high yield and US dollar high yield losing 12% over last year.
Top 5 performing fixed income sectors in 2022
| Sector | Return |
| Hong Kong Dollar | -8.43% |
| Renminbi | -10.03% |
| US Dollar | -11.70% |
| Global High Yield | -12.35% |
| US Dollar High Yield | -12.95% |
Bonds in Europe were the laggards for the year in terms of US dollar returns.
While it was generally a difficult year for the bond market overall, the depreciation in the euro against the US dollar made things worse.
The European sub-segment posted a return of -20.15% for the year, while euro-denominated high yield’s return for 2022 was -17.41%.
While some short-term bond funds were able to generate single-digit losses, funds that invest in long-term government with 10-to-15 years tenors were the hardest hit.
Asia Pacific was the worst performing sub-segment in 2021 owing to defaulting Chinese property giants, but it fared better relatively as the third worst performing category this year.
Yet, in absolute terms, the sector posted a return of -14.46% for the year, compared with only -8.23% in 2021.
Both Asian and China high yield have fared poorly for the year, with the worst performing fund generating a loss of up to 37.05%.
Interestingly, the top two performing funds in the category, Schroder’s ISF Asian Bond Total Return fund and DWS’s Asian Bonds, both have significant exposure to US treasury notes.
Emerging markets bonds (-14.29%) and global (-13.20%) round off the bottom five.
Bottom 5 performing fixed income sectors in 2022
| Sector | Return |
| Europe | -20.15% |
| Euro High Yield | -17.41% |
| Asia Pacific | -14.46% |
| Emerging Markets | -14.29% |
| Global | -13.20% |
