The local fund management industry has limped through this year as investors lose appetite for their products amid staggering market volatility, according to a report released yesterday by the Hong Kong Investment Funds Association.
Many Chinese have lost huge amount of money in mutual funds; now it's very difficult to raise new funds including QDII funds. Singapore will not see QDII funds buying our S-shares for a while.
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Managed funds sink on lack of investor appetite
Nick Westra
12 September 2008
The local fund management industry has limped through this year as investors lose appetite for their products amid staggering market volatility, according to a report released yesterday by the Hong Kong Investment Funds Association.
Gross sales of equity funds plunged 52 per cent to US$10.12 billion in the first seven months of the year compared with last year.
Gross sales of mutual funds dropped 40.9 per cent over the same period.
After attracting net inflows of US$6.38 billion in the first seven months of last year, equity funds saw net outflows of more than US$270 million so far this year, the HKIFA report shows.
Still, the worst may have yet to come for the fund industry amid a sliding global economy and slumping financial markets.
“Investors probably will continue to stay on the sidelines,” Sally Wong Chi-ming, executive director of HKIFA, wrote in the report.
“It is likely that fund sales will remain at a subdued level in the rest of this year.”
Sales of Greater China equity funds shrank 65 per cent to US$1.75 billion, with Asia excluding Japan equity funds slumping 62 per cent to US$1.72 billion.
Mandatory provident funds have also hit the skids after posting an average negative return of 2.71 per cent last month. That extends losses to a fourth consecutive month for the first time since November 2002 to March 2003, according to a Lipper report.
Equity and mixed-asset funds declined 4.44 per cent and 2.68 per cent on average respectively in August, the report shows. It has been difficult to avoid negative returns in the current market climate.
The Hang Seng Index has lost 30.29 per cent so far this year, falling to 19,388.72 yesterday.
Across the border, losses have been even more severe as the benchmark Shanghai Composite Index has plunged 60.49 per cent so far.
With losses piling up, however, institutional investors may actually start to deploy some of their cash positions to try and capture some value.
“When the Hang Seng Index drops to the current level, it may be much more attractive to some long-term funds,” said Linus Yip Sheung-chi, a strategist at First Shanghai Securities.
The local fund management industry achieved record growth last year as foreign investors poured in to tap into booming growth across the region, according to a survey released in July by the Securities and Futures Commission.
Funds managed in the city surged 56.5 per cent to HK$9.63 trillion last year from HK$6.15 trillion in 2006, the survey shows.
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