CHANGES in investment activity this year reflect market conditions and the growth of bank participation in unit trust sales in the territory. In the first half of this year and for the first time in the seven years, international and global funds outperformed their Asia-Pacific rivals in sales. Net sales of funds in this sector was US$43.65 million (HK$337.41 million) compared to redemptions in the Asia-Pacific sector of $28 million and in Asia-Pacific single country funds, excluding Hong Kong and Japan, of $56.5 million. In gross activity, Asia-Pacific funds still remained dominant with $254 million in the regional funds and $309 million in the single country funds against $82 million in international and global funds. This compares to 1993 with net sales in Asia-Pacific funds, including single country funds, of $779 million and gross sales of $1.6 billion against net sales in international funds of $11.7 million and gross sales of $150 million. Industry practitioners say the change in activity reflects market conditions. In 1993, on the back of a major asset inflation boom, Asia-Pacific markets benefitted from a flood of money, especially from North America which pushed many markets to record highs and 12 month gains in excess of 100 per cent in some cases. Western markets made more modest gains of less than 30 per cent. This year, the picture has changed. Asia-Pacific markets have been dull and, in many cases, in negative territory. North American equities, on the other hand, have made a strong bull run. They have been powered by growing corporate earnings, inflation being held in check, a buoyant but not over-heating economy, surges in technology stocks and interest rate cut speculation. In the wake of this, a six-year pattern of investment has been broken as investors shift, sometimes late in the day, into new and, more apparently, more rewarding fund sectors. The power of bank distribution is also a factor in the change. Banks selling unit trusts is a relatively recent development. The biggest entrant was Citibank in 1993. The bank set up a range of 150 funds, mostly from outside fund houses. This type of arrangement was copied around the territory by First Pacific Bank and Hang Seng Bank. Hongkong Bank is planning to raise the profile of its investment services with funds being offered from outside fund houses, alongside those of HSBC Asset Management. A sector that remains a key feature of activity and also contains a good portion of money coming in from bank distribution networks is the bonds and cash fund sectors. In 1993, in net sales, the sector was dwarfed by its Asia-Pacific big brother amounting to just $50 million but, in gross sales, the sector put in a respectable $900 million. Activity from banks tends to be more on the sales side than the redemption side as their client base is less likely to jump around between markets and redeem units than individual investors who have been investing in funds for a longer time and go directly to their chosen fund group to buy units. Banks have also been providing a modest amount of advice in the form of risk assessment of investor tolerance to volatility. This has tended to place bank customers at the less aggressive and less volatile end of the fund spectrum.