During the first quarter, SFC-authorised mutual funds in Hong Kong had net redemptions of $5.23bn, according to data from the Hong Kong Investment Funds Association.
Investors were positive during the first two months this year, as mutual funds across the different asset classes had positive net flows during the period. However, sentiment soured heavily in March, just when the coronavirus started to spread globally.
Monthly net inflows/outflows of SFC-authorised funds ($m)
|
Jan |
Feb | March |
Q1 total |
|
| Equities |
179.14 |
5.92 | -18.53 |
166.53 |
| Mixed-asset |
1,529 |
194.6 | -1,046.14 |
677.46 |
| Fixed income |
206.4 |
1,028.17 | -7,353.26 |
-6,118.69 |
Source: HKIFA
The bulk of the outflows came from fixed income funds, from which investors withdrew $7.35bn in March alone after ploughing $1.2bn during the first two months during the year.
Within the fixed income category, the outflows were led by global and Asia-focused bond funds during the quarter. US fixed income was the only category that had net positive flows during the period.
| Fixed income |
Q1 net inflows/outflows ($m) |
| Global |
-2,761.94 |
| US |
49.43 |
| Europe |
-867.26 |
| Asia |
-1,898.13 |
| Emerging markets |
-194.78 |
| High yield |
-446.01 |
| Total |
-6,118.69 |
Source: HKIFA
The sentiment in global fixed income funds is different in other markets in Asia, however. For example, Taiwan-domiciled global bond funds (excluding high yield) had net inflows of at least NT$1.3bn ($430m) during the first quarter, according to data from Morningstar Direct. The fund category also had net inflows in Thailand (THB 827m, $25.97m) and in Malaysia (RM 60m, $13.8m), the data shows.
Thematic fund popularity
In the first quarter, equity products sold in Hong Kong had net inflows of $166.5m, according to HKIFA data.
Although a majority of equity funds had outflows during the period, this was offset by huge inflows toward global equity and sector funds.
| SFC-authorised equity funds |
Q1 net inflows / outflows ($m) |
| Asia regional (ex-Japan) |
-379.4 |
| Asia regional (incl. Japan) |
-18.06 |
| Greater China |
-55.57 |
| China |
-381.57 |
| Japan |
-8.03 |
| Hong Kong |
-35.03 |
| Asia single market (non-Japan/HK) |
-78.16 |
| International |
727.51 |
| European regional (ex-Eastern Europe) |
-62.74 |
| European regional (incl. Eastern Europe) |
1.55 |
| European single market |
6.58 |
| North america |
64.52 |
| Global emerging markets |
-64.16 |
| Eastern Europe emerging markets |
-29.54 |
| Latin America emerging markets |
-8.81 |
| Sector funds |
483.45 |
| Reits-related funds |
3.99 |
| Total |
166.53 |
Source: HKIFA
For global equity funds, the bulk of the quarterly inflows happened in January. Although general investor sentiment in March turned sour, net redemptions were just at $11.3m.
The opposite was true for sector funds. Despite the market sell-off in March, net inflows nearly doubled from the combined flows in January and February, the data shows.
Q1 net inflows / outflows ($m)
| Equity sub-category |
Jan |
Feb | March |
Q1 total |
| International | 572.76 | 166.05 | -11.3 | 727.51 |
| Sector | 39 | 221.9 | 222.53 | 483.45 |
Source: HKIFA
Sector funds include those that invest in a particular theme or industry, including technology, healthcare, real estate and finance, as well as sustainable or ESG funds, the data shows.
In recent months, various wealth and asset managers, including UBS Wealth Management, HSBC Private Banking and JP Morgan Asset Management, have been promoting the healthcare and technology themes, as they believe that the sectors have proven relatively resilient during the pandemic and may benefit from long-term secular trends.
Other investors in Asia have also made a bet on specific themes during the first quarter. In Malaysia, while equity funds were largely avoided, investors poured money into technology and healthcare products, according to data from Morningstar.
Meanwhile, locally-domiciled ESG or sustainable funds sold across the different markets in Asia ex-Japan also registered positive flows during the first quarter.
Separately, sector funds also account for the largest share of the number of SFC-authorised products, followed by global equity funds, according to HKIFA data.
Of the 1,273 funds registered with the HKIFA, 123 are sector funds (10% of the total), while there are 100 global equity funds (8%).
