There were strong pan-Apac net inflows of $96bn into long-term funds, according to the US-based fintech firm in its latest Apac Radar quarterly report.
However, most of the inflows were generated in China, with increased Bank of Japan purchases of Japan equity ETFs also contributing to the positive headline figure, despite outflows elsewhere in the region.
“China was the focal point of new equity business in the first quarter, with locked-down investors seeming to shrug off the doom and gloom of the pandemic and pumping money into thematic equity ETFs, and broad-brush Chinese equity funds to a lesser extent,” said Yoon Ng, senior director of Apac Insights at Broadridge.
She noted that it was the country’s best quarter for equity demand since 2007.
“Top themes among China-listed ETFs have included 5G communication, technology, medicine, consumption, semi-conductors and new energy vehicles,” Ng told FSA.
She added that the true size of net inflows in China is understated, because new funds launched during the quarter will likely add another $37bn to the total long-term net flows during the period.
“If we add in roughly an additional $40bn from new fund launches, China will have amassed $135bn in long-term funds for Q1,” said Ng.
The findings confirm the trend shown by data released last month by the Asset Management Association of China (Amac).
Despite the origination and spread of the coronavirus in the mainland earlier this year, China’s retail mutual fund industry remained resilient, with assets increasing 20.5% during the first four months of this year, according to Amac figures.
In addition, a region-wide retreat from previously popular bond products, which had been marketed extensively last year to meet demand from income-starved investors during a protracted period of low government bond yields, was not joined by China.
“Several announcements of additional liquidity injections and a relatively low default risk helped to underpin the asset class’s traditional credentials as a safe port in a storm,” noted Broadridge.
However, the positive direction of China flows belied the experience in most of the fund centres in the region.
Top 3 best and worst selling sectors in Asia-Pacific
| Q1 2020 net sales |
($bn) |
| Bonds Asia-Pacific |
64 |
| Equities themes |
19 |
| Equities Japan |
17 |
| Bonds global currencies |
-9 |
| Mixed asset allocation |
-8 |
| Bonds emerging markets |
-7 |
Source: Broadridge Global Market Intelligence
Net outflows elsewhere in the region
Thailand, Hong Kong and Singapore together saw a cumulative total around $1bn in net outflows from equity ETFs during the first quarter, while cross-border managers suffered aggregate net outflows of $14bn from fixed-income strategies, including US investment grade corporate funds as well as $2.5bn in net outflows from flexible bond funds), and about $1bn in net outflows from global and technology equity funds.
Again, data from other sources support Broadridge’s analysis.
Funds across asset classes available for sale in Hong Kong and/or Singapore recorded net outflows of $66.1bn during the first quarter, according to a Morningstar report. The flood of redemptions occurred in March which saw net outflows of $100.8bn, overwhelming the net inflows of $21.7bn and $12.9bn of net inflows in January and February, respectively, before the world became fully aware of the extent of Covid-19 pandemic.
Moreover, the Hong Kong Investment Funds Association estimated that SFC-authorised mutual funds in Hong Kong had net redemptions of $5.23bn, with the bulk of the outflows coming from fixed income funds, from which investors withdrew $7.35bn in March alone after ploughing in $1.2bn during the first two months of the year.
Broadridge also confirmed Morningstar’s identification of Thailand’s mutual fund industry as one of the worst affected, noting that “Thailand’s short-term fixed-income fund space [took] the worst hit”.
Morningstar found that Thailand’s mutual fund industry has had massive redemptions this year, with net outflows of THB 206.04bn ($6.46bn) during the first quarter.
Meanwhile, Japan was the region’s other bright spot.
There were $51bn in net inflows, but most of these were made up of increased Japan equity ETF purchases by the Bank of Japan, according to Broadridge’s data.
Q1 2020 long-term fund net sales by markets
| Country |
($bn) |
| China |
98.5 |
| Japan |
23.1 |
| Malaysia |
0.0 |
| Indonesia |
-0.3 |
| Taiwan |
-1.5 |
| Singapore |
-5.2 |
| Hong Kong |
-6.2 |
| Thailand |
-13.4 |
Source: Broadridge Global Market Intelligence
April recovery
Yet, April’s data already indicates a recovery in most markets,” said Ng.
Flows turned positive in both Hong Kong and Singapore, with $4bn and $2bn respectively of inflows in the month, according to Broadridge data..
Looking ahead, Broadridge conducted interviews with about 200 Asian fund selectors and the results suggested that there is still demand for “income-oriented and risk mitigation strategies.
“Appetite for equities is expected to be tactical and geared towards mega themes, as volatility risks persist. The focus will be on quality – strong credit ratings, a low gearing ratio and firms with robust balance sheets,” said Ng.
“Strategies that offer income with downside protection are still very much in demand, for example mixed asset balanced funds, and other best sellers include global aggregate and US investment grade bond products.”
