Unit trust net sales in 79pc dive as markets fall
NET sales of unit trusts slumped 79 per cent in the first nine months of the year compared with same period last year, says Hong Kong Investment Funds Association.
Gross sales topped US$3.15 billion while redemptions were about $3.05 billion, leaving a net inflow of about $94 million, the association said yesterday.
Investors flooded into the funds during the first quarter as the stock market soared to record highs but the level of increase more than halved over the following six months.
The first and third quarters registered net sales of $156 million.
But this was offset by the outflow of about $61.68 million during the second quarter as the Hang Seng Index plunged to a 1994 low of 8,249.
Association chairman Roger Pyrke said: 'In the first three months of 1994, the industry was able to maintain last year's fourth-quarter strong sales which had been triggered off by the rally in the region's markets.
'However, corrections in the regional equity markets, largely caused by weakness in the world equity and bond markets, and repeated United States interest rates rises and weak US dollar, caused the momentum to falter.
'Under a less favourable investment climate and faced with uncertainties over the prospect of the markets, investors have taken profits and adopted a wait-and-see attitude. Consequently, gross sales fell and led the industry to record net redemptions in five months.' Mr Pyrke said he was encouraged by the steady gross inflow of funds in spite of waning investor sentiment.
'With the increasing needs among the local investors to identify alternative investment tools, and with more fund companies competing for business in the local market we believe that this growth will be maintained.' However, he warned continued uncertainty about interest rates meant the industry 'might have to brace for some fluctuations in short-term sales'.
Investors maintained their preference for regional equity funds with Asia-Pacific trusts topping both gross and net sales in September with respective sales of $126.95 million and $24 million.
Hong Kong funds recorded redemptions in the second and third quarters after big sales during the first quarter.
For the first three quarters the sector recorded a net inflow of $6.3 million.
Over the first quarter total sales of unit trusts fluctuated between $400 and $800 million, in line with sales in the final quarter of 1993.
Over the next six months the monthly inflows shrank to between $170 million and $300 million.