Fund managers opting for equities
Vast majority of companies are bullish about the outlook for the sector, with only 20 per cent overweight on bonds, HKIFA survey finds
The Hong Kong Investment Funds Association announced yesterday that over 70 per cent of fund management companies are overweight on equities whereas only 20 per cent are overweight on bonds.
"Globally we are experiencing a situation where countries are operating under very loose monetary policies," said Lieven Debruyne, chairman of HKIFA. "This has led to a tremendous amount of money being available on the global market. The money has to go somewhere and it will find its way to stock markets."
The outlook survey shows that fund managers are generally positive about the equity outlook. Within the equity sector, 62 per cent of the respondents are overweight on US equity markets, with 57 per cent for Asian equities and 46 per cent for Greater China.
Debruyne explained that China's market had been quite volatile in the six months prior to the survey and said that unless confidence in the growth of China is restored, it was hard to see demand for equity funds picking up.
Debruyne said that investors were taking a regional approach towards equities rather than focusing on a single market like China.
The market outlook survey reported that in the bond sector, fund managers continued to favour Asian and high yield bonds with 80 per cent and 60 per cent of the managers maintaining an overweight respectively.
In a separate report on the outlook for the fund industry in 2013, HKIFA said that fund sales powered on in the first two months of the year, with gross sales and net sales reaching US$13.75 billion and US$3.92 billion respectively. Compared with the same period last year, gross sales went up by 84 per cent while net sales soared 3.4 times.
Although the report by HKIFA showed that bond funds still accounted for the majority of the industry's gross sales at 47 per cent, on a net basis, it was the balanced funds (mixed asset funds) category that contributed most to inflows with gross sales at 29 per cent but net sales at 72 per cent.
"The bond market has been popular in the last few years due to bearish economic conditions. However there has been a view that conditions are improving. Instead of a great rotation, middle ground was sought and investors moved from a bond-centric approach to a more balanced one, increasing their exposure in equity without getting overexposed to risk," said Sally Wong, chief executive officer of HKIFA.
Bruno Lee, unit trust subcommittee chairman, said that while appetite for risky assets might be returning, he did not expect to see huge spike of sales in risky funds in the short term. Investors would probably focus on yield generating products that enabled them to capitalise on the upside of recovery, whilst protecting against market volatilities.