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Hong Kong funds see huge outflows

Funds network Calastone processed its highest ever level of monthly net redemptions from Hong Kong funds in March.

Net outflows from funds managed in Hong Kong amounted to HKD 13.5bn ($1.74bn) in March, far exceeding redemptions in any month last year when the territory was rocked by social and political unrest.

Most of the outflows were from bond funds, according to London-based Calastone, which processes, through back office functions, about $234bn in investment value worldwide.

“Covid-19 has caused a huge crisis in confidence. Global volatility in March pushed the fund flows to the highest level of net redemptions across the Calastone network, unseen even through [last year’s] protests,” said Leo Chen, managing director and head of Asia at Calastone in a statement.

The first quarter of 2020 has seen net outflows overall, since the first coronavirus outbreak in China in December.

“However, the lion’s share of redemptions was in March, as Covid-19 cases expanded worldwide and businesses started shutting down to preserve the welfare of employees. Volatility spiked in global markets as the effects of worldwide economic recession began to be felt,” said Chen.

For Hong Kong, the global crisis was compounded by a second wave of Covid-19 cases in late March, as travellers returned to the city and carried the virus back from other countries.

“This amounted to a ‘perfect storm’, with local and global events prompting investors to retract their money in response to the current situation and in anticipation of further trouble ahead,” said Chen.

In contrast, during the disturbances in Hong Kong last year which sent the territory into recession, funds only suffered net redemptions in the two months of May and December, with outflows of  HKD 3.3bn and HKD 3.8bn respectively, according to Calastone data.

“These [figures] do not compare to the significant drop seen more recently during the outbreak of coronavirus,” said Chen.

The global pandemic has hurt investor sentiment elsewhere in Asia too.

Thailand’s mutual fund industry has had massive redemptions this year, with net outflows of THB 206.04bn ($6.26bn) during the first quarter, according to data from Morningstar Direct.

Like Hong Kong, fixed income funds accounted for the bulk of the outflows at THB 273bn, as investors sought the sanctuary of cash.

Net fund flows across the Calastone network from January 2019 to March 2020 for Hong Kong based fund managers

Source: Calastone


Part of Mark Allen.