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HKIFA sees equity fund comeback in 2017

Fixed income inflows turned positive in 2016, but the Hong Kong Investment Funds Association is optimistic about equity funds in the first half.

The year 2016 was all about bond funds. For the first 11 months, fixed income products selling in the SAR recorded net sales of $11.8bn, versus a net outflow of $3.8bn for the same period in 2015, according to the HKIFA.

Net sales of retail funds across all fund types hit $4.2bn, up 20% from 2015. Gross sales, or total inflows, dropped 10% to $62.3bn. The December and full year figures have not yet been released.

But the trend has already shown signs of reversal after the first three quarters, said Arthur Bacci, HKIFA chairman and head of Principal International (Hong Kong), in a briefing last week.

In November alone, positive net sales among funds in Hong Kong were primarily seen in Asia ex-Japan equity funds, North America equity funds, sector equity funds, as well as high yield bond funds. On the other hand, bond funds had a monthly net outflow, the first time in 2016.

“We think value stocks [globally] will continue to benefit. If inflation continues to increase, reflecting economic strength, then the earnings will come through, thus value stocks will be winners.”

Geopolitical tensions, and how Donald Trump’s policy will materialise, are the major risks to watch out in the latter half of the year, he continued. “They have the potential, as we saw in 2016, to have a significant impact on the markets in the short-run.”

Online fund distribution

On the regulatory front, Bacci said some initiatives set out by the Securities and Futures Commission were a positive.

“The SFC was very active [in 2016] and had a robust agenda – such as the proposed changes to the senior manager regime, the fee disclosures, and alternative distribution on the suitability and know-your-customer rules,” areas that the association is discussing with the members on the operational impacts, he noted.

The SFC will have a consultation on alternative distribution later this year, added Sally Wong, HKIFA CEO. It is hoped to act as a step toward setting up online distribution channels for mutual funds in the SAR.

The Hong Kong Stock Exchange is studying the feasibility of launching such a platform, following steps taken by Taiwan, Korea and Thailand, Wong added. Meanwhile, brokers are also interested in adding mutual fund sales and service for clients, she said.

Part of the Mark Allen Group.