HK's fund industry sinks to a three-year trough

PUBLISHED : Tuesday, 13 December, 2011, 12:00am
UPDATED : Tuesday, 13 December, 2011, 12:00am


Hong Kong's fund industry in September and October recorded its worst sales and redemption record in three years as investors sat on the sidelines amid fears about Europe's sovereign debt crisis.

Kerry Ching Kim-wai, chairwoman of the Hong Kong Investment Funds Association (HKIFA), said the economic outlook would remain uncertain next year but that year-end bonuses could help alleviate the situation. 'The sales of fund products will hopefully turn better in the first quarter of next year as individuals who receive year-end bonuses may seek investment opportunities,' Ching said yesterday. 'Likewise, companies which have surplus cash by the year end would also invest the money in the first quarter.'

Fund sales in the city did well in the first five months of this year. But since sales peaked in May, they have been declining as Europe's debt tumult spooked investors worldwide. In September and October, the city's fund industry recorded net outflows, which means there were higher amounts of redemptions than sales. It was the first net outflow in a year, and the largest outflow since December 2008 when the global financial crisis was at its worst in the wake of the collapse of Lehman Brothers that September.

In October this year, total fund sales fell to US$2.26 billion, down from US$2.59 billion in September, which was down 35.8 per cent from August.

Net outflows stood at US$290 million in October, following a net outflow of US$469 million in September. Also, fund redemptions amounted to US$2.55 billion in October, following redemptions of US$3.06 billion in September.

Ching said the redemption pattern showed there were still investors buying new funds, as investors might have redeemed stock funds and shifted to safer options, such as bond funds. 'Some investors may decide to take profit amid a volatile market,' she said.

Of the 13 equity fund categories, seven saw net outflows in the first 10 months this year. Greater China equity funds, the most popular fund category in the past few years, saw net outflows hit a peak of US$554 million.

Total sales of all equity funds in the first 10 months, however, still rose 39.7 per cent annually to US$15.02 billion, thanks to strong sales in the first five months of this year.

In the first 10 months of this year, the total sales of bond funds stood at US$14.63 billion, up 41.6 per cent from a year earlier.

'Due to the continued uncertain market outlook, it is expected that investors will adopt a more cautious approach, and interest for higher-risk products is likely to be subdued,'' said Terry Pan San-kong, vice-chairman of HKIFA.

However, Pan said many Asian firms were still doing well and believed long-term investors would continue to invest in less risky fund products, such as stock funds that invest in high dividend-yielding stocks.