Retail fund sales in Hong Kong up by a half to US$44.1 billion

Strong market sentiment led investors to buy into funds, but MSCI inclusion has not helped as China stock funds record highest redemptions since 2015

PUBLISHED : Tuesday, 15 August, 2017, 12:20pm
UPDATED : Tuesday, 15 August, 2017, 11:00pm

Total retail fund sales in the first half of this year jumped 51 per cent to US$44.1 billion, as strong market sentiment led higher demand for investment products, the Hong Kong Investment Funds Association (HKIFA) said on Tuesday.

Retail fund net sales – which deducts redemptions from the gross sales figures – expanded 260 per cent from a year earlier to US$4.8 billion. That comfortably surpassed net sales in the whole of 2016 of US$3.1 billion, and US$3 billion in 2015.

“The significant improvement in net sales during the first half of the year is underpinned by the robust performance of various equity and bond markets and an improving economic outlook globally,” said Arthur Bacci, chairman of HKIFA.

“As central banks synchronise their efforts to remove monetary accommodation, investors should be alert to potential impacts on equity and bond valuations. The currency market may also see greater impact on returns.”

The best sellers were the bond funds, which reported total sales of US$18.91 billion in the first six months, up 28 per cent from last year. High-yield bond funds had net sales of US$2.4 billion, easily beating the full year figure for 2016 of US$1.5 billion.

The second-best sellers were balance funds, which invest in a mixture of stocks and bonds. Their gross sales tripled to US$12.4 billion in the period.

Equity funds also reported a 30 per cent increase in total sales in the first half to US$11.498 billion, thanks to the strong stock market rally worldwide in recent months. The Hang Seng Index climbed 14.5 per cent in the first half.

However, there was also strong redemption demand in stock funds, which have recorded net redemptions for 16 months in row. The net outflow did however fall in the January to June period to USS$3.8 billion, compared with US$4.3 billion a year earlier.

Chinese equity funds saw outflows of US$931 million in the first half, the most among all stock funds.

Despite the inclusion of A shares into the MSCI’s emerging markets indices on June 21, the category saw strong gross redemptions of US$412.9 million in June, the highest since the market crash in the summer of 2015.

In May, European regional market (excluding Eastern European countries) funds reversed their net outflows trend of the previous 15 months. They reported net sales of around US$130 million in the second quarter.

The European markets had been plagued by Brexit in June last year while investors also worried about a series of key elections in Europe. However, improved economic figures and favourable election results have led to more certainty and driven investors back to the market.