The terrorist attacks on the United States hit Hong Kong's fund industry in September, with stock fund sales plunging to a 30-month low. Fund managers said the drop meant less new money for them to invest, slowing a stock-market rebound. Stock fund sales in September were US$142.15 million, down 23.2 per cent from August and the lowest since February 1999, according to the Hong Kong Investment Funds Association (IFA). The drop in sales and redemption pressure led to a US$85.89 million net outflow of stock funds, up 47 per cent from the previous month. It was the largest outflow since September last year. A net outflow occurs when sales are less than the amount of funds redeemed by investors. The IFA said stock fund redemptions in September were US$228.04 million - the heaviest this year. Stewart Aldcroft, managing director of South Africa-based Investec Asset Management Asia, said the September 11 terrorist attacks were the main reason for the sales drop, as they had led to sharp falls in stock markets around the world. 'Due to the market uncertainty, it is natural for Hong Kong investors to avoid investing in stock funds,' he said. The heavy redemption would force fund managers to sell their stock portfolios to raise cash for investors. The drop in stock fund sales was likely to continue because of the uncertain stock market. Mr Aldcroft said while stock funds had been at the core of SAR fund sales in the past few years - representing more than 80 per cent of all sales - guaranteed funds had grown in popularity because of the uncertain environment. In September, guaranteed funds had gross sales of US$646.84 million and a net inflow of US$457.68 million. Mr Aldcroft said it was not a good sign for the SAR fund industry if guaranteed products continued to be more popular than stock funds. 'Guaranteed funds are actually similar to bank products in that they are mainly invested in bank deposits or bonds, with no investment in the stock markets,' he said. 'This would not bring very good returns in the longer term.' IFA chairman Joseph Silva said it would be more difficult for fund companies to introduce guaranteed products due to the low interest-rate environment. The IFA said funds sale in Hong Kong in September were US$799.96 million, with a net inflow of US$345.31 million.