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HK equity funds lure net inflows in Q1 as

Equity funds in Hong Kong continued to attract net inflows during the first four months of the year, with investors showing a preference for funds focussing on developed markets.

According to Hong Kong Investment Funds Association data, equity funds notched up “impressive” net sales worth US$4.4bn (£2.6bn, €3.2bn) during January-April, which is 4.8 times higher than the corresponding period in 2013. The gross sales figure during the review period was 1.5 times higher at $13.8bn.

For the industry as a whole, the gross sales during January-April were $27.4bn, which was more or less in line with the similar period in 2013, but net sales declined by 38% to $5.2bn respectively.

After witnessing the largest monthly outflows since 2008 in December last year, sales momentum began to pick up in 2014, with the industry capturing net inflows each month.

With abundant market liquidity and the gradual global economic recovery, especially in the developed markets, demand for equity funds has picked up since the latter part of 2013, but not across-the-board.

Among the 16 equity fund categories, nine registered net inflows with investors showing interest in US and European equity funds, instead of the Asian and other emerging where concerns remain over structural issues faced by these markets.

European regional market equity funds ranked first, attracting $2.1bn of net inflows followed by international equity funds and sector funds pulling in $1.8bn and $0.7bn respectively.

Asia regional (ex Japan) equity funds, Asian single market equity funds and global emerging markets equity funds witnessed the highest outflows, at $551m, $142m, and $124m, respectively.

Bruno Lee, HKIFA Unit Trust Subcommittee chairman said: “The growth in gross and net sales as compared with the second half of 2013 indicated that, after digesting the impact on US tapering since the end of last year and despite geo-political uncertainty, Hong Kong retail investors’ investment demand for both potential higher yielding income oriented and growth oriented funds investing in major developed markets remain strong.”

Equity funds accounted for the “lion’s share” of fund sales at about 50% of the industry gross total whereas bond funds represented only 25.7%.

As regards the bond funds, their gross sales declined by 42% on-year to $7bn. Net sales were at $415m, way below the $1.6bn registered in the corresponding period of last year.

The industry association said there was a “renewed” interest in certain bond fund sectors such as high yield bond funds that saw net inflows at $1.6bn, 6.4 times higher than the same period in 2013. European bond funds also managed to pull in $358m of net inflows.

Global bond funds witnessed the heaviest outflows amounting to $1.2bn.

Net sales for balanced funds were at $247m, which paled in comparison with the $5.9bn registered in the corresponding period of last year.

Part of the Mark Allen Group.