Investors have more confidence in bond funds

PUBLISHED : Wednesday, 14 March, 2012, 12:00am
UPDATED : Wednesday, 14 March, 2012, 12:00am


The low interest rate environment and overhanging uncertainties in the global economy make bond funds an increasingly attractive option as investors look for stable returns, according to the Hong Kong Investment Funds Association.

Equity fund sales remained lacklustre in the first two months of this year despite the steady rebound in stock markets, the association said.

The city's fund industry registered net sales of US$6.2 billion last year, down 0.7 per cent from 2010. Gross sales increased 30.2 per cent to US$37.5 billion.

Sales were robust in the first half of the year as high inflation and low interest rates drove investors into stocks, but they dipped in the second half as the euro-zone debt crisis and concerns about the United States economy sent global markets tumbling.

The sell-off saw the industry suffer net outflows of US$469 million in September and US$290 million in October. However, moderate net inflows returned towards the end of the year.

Association chairman Kerry Ching Kim-wai said heavy outflows from equity funds had stopped this year as fund managers finished allocating their assets.

But sales of equity funds remained flat in the past two months even as stocks rebounded.

Interest in bond funds continued to grow steadily last year, with net cash inflows recorded every month.

Bond funds accounted for 77.5 per cent of the industry's net inflows and 44.4 per cent of overall sales.

Ching said money flows could be more volatile with equity bond funds as they mirrored the movements in global stock markets, but bond funds were likely to see steady growth as investors focused on both global bond funds and also the riskier, more rewarding emerging markets high-yield bond funds.

Investors' appetite in greater China equity funds and emerging markets equity funds were especially sensitive to changes in market sentiments.

Greater China equity funds were among the most popular choices of investors, Ching said, but the category suffered the greatest outflows last year among all equity funds, recording a net outflow of US$566 million. It was followed by emerging markets equity funds, with US$301 million.

Hong Kong equity funds attracted most of the inflows, pulling US$522 million in net inflows.


The amount of gross sales in bond funds last year, in US$

- An increase of 38.9 per cent from 2010