Participants in the Fund Selector Asia Asset Class Research, a quarterly survey of long-term (12 months) sentiment of fund selectors in Hong Kong, Singapore, Thailand and Malaysia, have shown a markedly higher interest in global emerging market equities in March 2018, when the most recent data was collected, compared with the result three months earlier.
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 March 2018, as many as 60% of respondents said they would add to their allocation, compared to only 37% in December 2017. This represents a significant jump in the interest in emerging market equities, after a prolonged period of more lukewarm sentiment. Only 39% of fund selectors said they intended to add to their allocation in September 2017 and 43% in June 2017.
An industry expert told FSA that he attributed this strengthening of sentiment to investors finding good value in emerging market equities, compared to developed markets which have performed exceptionally strongly recently. The sentiment is further boosted by the healthy outlook on the emerging market economies, positive development in commodity prices and a weakening outlook on the US dollar, he said.
Global emerging market funds have been an attractive category for investors around the globe throughout the 2017. Global fund flow data from Morningstar show consistent net inflows into this category in the past 15 months, peaking in January 2018, but remaining strong in the first quarter of 2018.
Assets and net flows in global emerging market mutual funds
Data: Morningstar, in US dollars, as of 31 March 2018, funds domiciled globally.
Fund selectors also said they intended to increase their allocation to specific regions within emerging markets, such as Asia-Pacific ex-Japan and China. Both categories were among the top three in March by FSA‘s net buyer score, which is calculated by subtracting the number of respondents saying they would reduce their allocation from the number who said they would increase it. The scores did not change since December.
