Bangkok--22 Apr--HSBC
***Asia-Pacific ex Japan equities favoured by half of fund managers***
***Three in four fund managers hold overweight views on Asian local currency bonds***
***Bond funds record strong inflows of USD56 billion in 4Q12***
Fifty seven per cent of global fund managers (vs 75% in 1Q13) covered in HSBC’s latest Fund Managers’ survey continue to favour equities in the second quarter of 2013 with no one holding underweight views towards this asset class.
A tenth of respondents (14%) turned overweight towards bonds and cash in 2Q13 from none in the previous quarter (0% for both in 1Q13). Over two in five fund managers (43%) hold an underweight view towards bonds and cash compared to 38% and 63% respectively in 1Q13.
Vineet Vohra, HSBC’s Regional Head of Wealth Development, Asia Pacific, said: “Global fund managers generally remain optimistic about the prospects of equities. Emerging markets equities including Asia equities continue to be attractive as a result of better fundamentals. However, it is worth noting that some managers have turned cautious due to renewed concerns on the Eurozone debt crisis.”
Emerging markets equities are back in the spotlight in 2Q13 as over half of fund managers (57%) hold positive views, compared to only 29% in the previous quarter. Preference for North America equities dropped from 75% to 57% while Asia Pacific ex Japan equities are favoured by 50% of fund managers, up from 43%. No fund manager is underweight on Greater China, Emerging markets and Asia equities, while 14% are underweight on North America equities
(vs 25% in 1Q13).
In terms of bonds, Asian local currency bonds (75%) stand out given the region’s stronger fundamentals and potential currency appreciation. With the USD under pressure from the Fed’s continued support for quantitative easing, four in five fund managers are underweight US dollar bonds and none of them holds an overweight view towards this asset class.
Asset class allocation strategy
Underweight Neutral Overweight
2Q13 1Q13 2Q13 1Q13 2Q13 1Q13
Equities 0% 0% 43% 25% 57% 75%
- North America 14% 25% 29% 0% 57% 75%
- Europe (ex. UK) 14% 25% 43% 25% 43% 50%
- Japan 0% 25% 71% 63% 29% 13%
- Asia Pacific ex. Japan 0% 0% 50% 57% 50% 43%
- Emerging markets 0% 14% 43% 57% 57% 29%
- Greater China 0% 0% 40% 50% 60% 50%
Bonds 43% 38% 43% 63% 14% 0%
- US Dollar 80% 29% 20% 29% 0% 43%
- Asian Local Currency 0% 33% 25% 33% 75% 33%
Bonds
- Global Emerging markets 0% 0% 29% 38% 71% 63%
- High yield 14% 0% 14% 29% 71% 71%
Cash 43% 63% 43% 38% 14% 0%
4Q12 global fund flows
Funds under management (FUM) across 10 of the world’s leading fund management houses1 polled reached almost USD4 trillion2 at the end of 4Q 2012, up by 3.2% or US$124 billion, from the previous quarter.
Bond funds were the major contributors to the FUM growth, representing 40% or around USD50 billion of the total increase. Bond funds also recorded the second largest net inflow since 2008 totalling USD55.9 billion, of which Asian bonds grew 11%. Equity funds continued to record a net outflow of USD13.4 billion in 4Q 2012, the tenth consecutive quarter, as investors were concerned about uncertainties from the European debt crisis and the US fiscal talks.
Net fund flows3 (as a percentage of FUM):
Asset class End 4Q12 End 3Q12
Asian bonds +10.7% +2.7%
Emerging markets/High yield bonds +6.7% +5.3%
Emerging market equities +4.4% +1.8%
US bonds +3.8% -0.2%
Asia Pacific ex-Japan equities +1.5% -6.4%
Global bonds +0.8% +4.0%
Global equities +0.01% -4.0%
North American equities -0.4% -1.1%
Europe including UK equities -2.2% +0.9%
Japanequities -4.1% -1.9%
Europe including UK bonds -5.0% -9.2%
Greater China equities -17.2% -5.2%
Market performance 4Q 2012 vs 3Q12
All equity and bond markets except North America equities and global bonds recorded positive returns in 4Q2012. Greater China equities were the best performer with a 12.9% growth, followed by Europe including UK equities (+7.0%), and Asia Pacific ex Japan equities (+6.0%). On fixed income, Europe including UK bonds recorded 4.6% return and high yield/emerging markets bonds went up 3.9%.
Vineet Vohra added: “Greater China equity funds suffered a net outflow of over 17% as investors likely took profit from the strong market rally in 4Q12. Except for this, emerging markets equities are generally in good shape and continue to attract inflows with Asia-Pacific ex Japan equity funds having net inflows for the first time since 3Q2011 driven by its relatively resilient economies. The strong flows to bond funds reflect that investors are still seeking yield amidst the low interest rate environment. As no asset class will outperform all the time, investors are advised to avoid over exposure to any particular asset class and adopt the principles of asset allocation and diversification in their financial planning.”
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