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Bond products lead HK fund flows recovery

Fund sales have risen in Hong Kong since record outflows in March, according to the Hong Kong Investment Funds Association (HKIFA).

Hong Kong’s fund industry registered gross sales of $54.5bn in the first eight months of 2020, down by 16% from the same period last year, according to the HKIFA. However, between April and August, the industry experienced robust aggregate net inflows of $1.5bn, after suffering net outflows of $8.4bn in March alone.

Bond funds were the main contributor to a resurgence of fund sales, accounting for about 48% of inflows in the first eight months of this year, HKIFA data shows.

The rebound came after a sharp retraction in March when bond funds suffered the worst outflows of $7.3bn across asset class categories as investors jettisoned credit exposure. Confidence was quickly restored by central banks, and money surged back into fixed income products, with net inflows amounting to $3.8bn from the start of April until the end of August.

Three sub-categories in particular have garnered strong inflows since April. Global bond funds have attracted net inflows of $696m, high yield fixed income products have received net inflows of $345m, and, by a large margin the most popular, Asian bond funds have enjoyed $2.815bn of net inflows, according to HKIFA.

But, year-to-date, bond funds have still to make up the deficit created by a disastrous March, and have seen net outflows of $2.3bn.

On a net basis, the funds industry as a whole saw net outflows of $3.7bn in the year to the end of August.

“[However], since April, the industry has almost consistently registered monthly net inflows,” noted Nelson Chow, chairman of HKIFA, in a statement.

“Global central banks responded swiftly by adopting dovish monetary policies as well as by introducing other supporting measures [to the Covid-19 pandemic]. With interest rates maintained at historical low levels, investment sentiment started to improve and global asset prices started to rise,” he said.

Among other asset classes, equity funds attracted gross sales of about $16bn in the first eight months of the year, accounting for close to 29% of the industry total, and a 52% increase compared with the same period last year.

While equity funds as a whole still saw net outflows, at $797m, this already represented a major improvement over 2019, when $3.9bn of net outflows were registered, according to HKIFA data.

However, since May, they have been experiencing continual outflows, with only sector funds – such as technology themed products – attracting positive monthly flows.

Meanwhile, balanced funds saw a modest increase of 11% in gross sales to $10.7bn compared with the same period of 2019. They registered net outflows of $682m, though this was much lower than the $4.4bn experienced last year.

Net outflows spiked in March and reached $1bn. Outflows dropped off to $88m in April, but picked up in subsequent months to between $300m and $400m a month, according to HKIFA.

Nevertheless, recent figures across fund categories in general are positive. Gross sales in August was at $6.8bn, up by 48% from the April low of $4.6bn, HKIFA data shows.


Hong Kong Retail Fund Yearly Gross & Net Sales

Source: Hong Kong Investment Funds Association


Yearly Gross Sales Breakdown by Major Fund Categories

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