Year of the bonds
Hong Kong is obsessed withbig yields, but investors must diversify in 2013, says Jasper Moiseiwitsch
For all the gloom, some may overlook the fact that 2012 was a great year. Virtually all asset classes scored gains, with even equity markets venturing into positive territory thanks to a second-half rally.
But one asset ruled in 2012: bonds. Of the US$11.6 billion new money invested in funds in Hong Kong in 2012, US$11.2 billion went to bond and income funds, according to the Hong Kong Investment Funds Association (HKIFA). "Bond and income funds completely dominate mutual fund sales," says HKIFA chairman and Schroders Hong Kong head Lieven Debruyne (see graph).
Investors wary of share market volatility in the context of a weak global economy, and keen to get a little bit of yield an environment of near-zero deposit rates, are buying bonds. In particular, they are buying high-yield bonds, the best-selling fund category in Hong Kong in 2012 (based on data up to October), according to the HKIFA, with gross sales of US$9.8 billion.
"Everyone is going after yield," says Isabella Chan, the head of Hong Kong sales for Franklin Templeton, a fund house.
So 2012 was the year of yield. Hongkongers are piling into debt, and that trend continued even after the Hang Seng Index began its rise in September, increasing 25 per cent since June. There has been a powerful trend in favour of bonds and it looks set to continue in 2013, according to those in the industry.