China funds record second worst global performance in third quarter
China funds lost 21.2 per cent of their value in the past three months, their worst quarterly performance in four years as concerns over economic growth took their toll, data company Lipper said yesterday.
The performance of the China funds in the July-September period was the worst globally after Latin America funds, which fell 21.7 per cent. Equity funds worldwide lost an average 9.2 per cent.
"For those waiting for a market correction, it's here. Global markets took it on the chin over the last three months, with fears of slowing global growth, Federal Reserve tightening measures, slumping commodity prices, and drug pricing issues sending major indices down more than 10 per cent from their recent market highs," said Tom Roseen, the head of research services at Lipper, which is part of Thomson Reuters.
Roseen said the primary catalyst for the market free falls was China, with the Shanghai Composite Index down 28.63 per cent for the quarter after a slew of poor economic reports showed the growth trajectory for the world's second-largest economy was on a decline.
He also said last month's Federal Open Market Committee decision to keep interest rates unchanged sent many major indices to their worst quarterly performance since at least the third quarter of 2011, as market pundits began to question the health of the US economy.
The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all suffered negative returns for the quarter, by 7.58 per cent, 6.94 per cent, and 7.35 per cent, respectively.
Most equity funds tracked by Lipper did poorly too, with 92 of 96 equity and mixed-equity fund classifications posting negative returns.
Only 4 per cent of individual equity and mixed-asset funds made gains. Alternative investment funds were top performers with a return of 1.36 per cent and real estate funds were next with 1.25 per cent.
In terms of sectors, energy and commodities fared the worst, with energy funds dropping 24.94 per cent, natural resources funds 20.9 per cent and basic materials funds 20.75 per cent.
They were hard hit by falling commodities prices; near-month crude oil dived 24.18 per cent to US$45.09 per barrel and gold slid 4.78 per cent to US$1,115.50 an ounce.
"With an increased expectation of a rise in near-term interest rates, plummeting commodity prices [particularly crude oil] and a decline in demand from China, it was little wonder interest rate-sensitive securities and commodities were pummelled during the quarter," Roseen said.
Analysts are not optimistic about the outlook for the fourth quarter.
Louis Tse Ming-kwong, a director of VC Brokerage, said China's economy had softened and would not recover soon.
