Fund sales plunge in Hong Kong

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Although balanced funds saw net inflows during the first 10 months of 2018, equity and bond funds suffered net redemptions, according to an industry report.

Net sales for Hong Kong’s retail funds industry to the end of October were down by 93% compared with the same period in 2017, at $694m, based on data from the Hong Kong Investment Funds Association (HKIFA).

Gross sales only grew 2% to $80.1bn during the first 10 months. On the flipside, gross redemptions rose 16% to $79.4bn during the same period.

Net outflows in fixed income and equities

Of the different fund categories, fixed income saw the largest net outflows at around $6.1bn, mainly attributable to a 39% drop in gross sales during the period. More specifically, Asian and high yield bond funds saw the heaviest net outflows, despite being among the most popular fixed income categories in 2017.

Net outflows

Asian bond funds

$2.6bn

High yield bond funds

$2bn

Source: HKIFA

However, the report noted that bond funds seemed to be back in favour during the third quarter as they managed to attract net inflows of $240m in September and $392m in October.

Meanwhile, equity funds continued to see net outflows for the 10-month period last year, dropping to $1.9bn from $6.2bn in 2017.

Among the different equity categories, China, Asia (ex-Japan) and Greater China funds saw the heaviest outflows.

However, there were individual equity fund categories that managed to attract net inflows. For example, sector funds fared the best in terms of sales, gaining nearly $800m, followed by international funds.

Net outflows

China equity funds

$735m

Asia (ex-Japan) funds

$732m

Greater China equity funds

$643m

Net inflows

Sector funds

$799m

International funds

$238m

Source: HKIFA

Yet while equity and fixed income funds saw net outflows to end-October last year, balanced funds attracted net inflows of $7.8bn, compared with $5.3bn in 2017.

The report said balanced funds managed to consistently attract monthly net inflows until October, when there were net outflows of $1.1bn.

“Trade tensions between the US and China, the pace of US interest rate hikes, the monetary policies of Europe, Japan and other key markets, the potential slowdown in global economic growth, Brexit and other geo-political tensions, will pose much uncertainty to the investment markets and cause more volatility. Against this backdrop, we believe that risk appetite will continue to be muted,” the report said.

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