Investors in Hong Kong equity funds took advantage of a near 11 per cent rally in the Hang Seng Index during March, resulting in the heaviest monthly redemptions so far this year. Gross redemptions from Hong Kong funds amounted to US$39.86 million in March, leading to net outflows of $13.99 million, according to the Hong Kong Investment Funds Association. This followed gross redemptions of $5.6 million in February and $20.6 million in January. Across all fund categories, the association's 50 fund management members reported gross sales of $507.13 million during March - a 44.75 per cent increase over February's figure. After stripping out $326 million in redemptions, net inflows were $181.12 million. The association said its six Asian fund sectors recorded aggregate net inflows for the first time this year, totalling $14.76 million, after gross sales jumped to $113.36 million from $49.26 million in February. But despite the increased interest in Asia, bond funds and European funds still attracted the biggest share of sales. The two sectors generated gross sales of $223.99 million, or 44.17 per cent of the industry total, with bond funds winning the biggest sales at $176.81 million. By comparison, Asian funds accounted for 22.35 per cent of the total. Association chairman Desmond Chan Kwok-kit said single Asian funds - especially those focused on countries such as Japan, South Korea and Thailand - had seen better interest from investors during March, spurred by improved economic sentiment and firming share markets. Japanese funds, in particular, tripled gross sales compared with February, registering their highest figures since June 1997. However, Mr Chan said it would be premature to say investors were returning to Asian funds 'en masse'. 'Most Asian economies are still very much in a restructuring process and in the short run, investors would probably still be selective rather than take up Asian funds across the board,' he said. Besides, not every Asian sector enjoyed gains. As well as the outflows from Hong Kong funds, Asia-Pacific regional funds, excluding Japan and Hong Kong, saw net outflows of $1.49 million.