Bangkok--5 Mar--HSBC
*** 67 per cent of fund managers hold an overweight view towards Greater China equities; no underweight views for 1Q09***
***Nearly 6 in 10 fund managers hold an overweight view on bonds; no underweight views for 1Q09***
Fund managers polled in HSBC’s quarterly Fund Managers Survey turned bullish about Greater China equities in the first quarter of 2009.
Sixty-seven per cent of fund managers took an overweight view, up from 50 per cent in the last quarter of 2008. No one held an underweight view in the first quarter this year, in contrast to the previous 38 per cent. Thirty-three per cent were neutral, up from 13 per cent.
Bonnie Tse, HSBC’s Head of Premier, Wealth Management and Mid-Market Segment for Personal Financial Services in Asia-Pacific, said: “Fund managers are most optimistic about Greater China equities because they expect the stimulus policies of the Chinese government to support domestic demand and economic growth. This may also be linked to the potential positive impact of the US stimulus and recovery measures on China’s economy.”
Fund managers in the survey also favoured bonds over equities as a whole in the first quarter of 2009 as uncertainties across the global economy remain. Fifty-seven per cent of fund managers held an overweight view towards bonds (vs 50% in 4Q08) while 43 per cent held a neutral view (vs 30%). None held an underweight view (vs 20% in 4Q08).
In HSBC’s last survey, fund managers were more bullish towards equities in the fourth quarter of 2008 due to relatively attractive valuations at that time.
Ms Tse noted: “Flight to quality continues to be a central theme for fund managers as they tend to veer towards more conservative asset classes given continued market volatility and the global economic uncertainty. We expect this sentiment to remain in the medium term.”
The HSBC survey analyses 12 of the world’s leading fund management houses1 by their funds under management (FUM), their asset allocation views and their global money flows. The net money flow2 estimates are derived from movements in FUM versus index movements in the equivalent class. (A full copy of the survey results is attached to this release.)
At the end of the fourth quarter of 2008, the fund houses covered in the survey reported aggregated FUM of US$3.27 trillion, representing about 17 per cent of the estimated total global FUM3.
The survey shows that at the end of the fourth quarter of 2008, FUM decreased by US$295 billion, a drop of 8.26 per cent from 3Q08. Equity funds, which decreased by US$252 billion, contributed the most to total FUM decrease. At the same time, money funds recorded an increase of US$83.2 billion and bond funds, an increase of US$4.5 billion.
Below are the net fund flows derived by subtracting market growth from FUM growth during the fourth quarter of 2008 in various asset classes:
Net flows as percentage of sector FUM
Asset class End 4Q08 End 3Q08
Emerging markets equities -9.2% -11.1%
Greater China equities -4.4% -4.6%
Asia-Pacific ex-Japan equities -1.0% -5.5%
High-yield/emerging markets bonds -11.9% -6.3%
Europe (including UK) bonds +8.7% -5.4%
US bonds +2.9% +9.4%
Ms Tse said: “Global emerging markets equity funds continued to see the highest outflow due to concerns that the recession in developed markets could place emerging market equities at risk. Emerging markets bonds, likewise, posted the highest outflow as their economies were hard hit by the credit crunch. European bonds saw the strongest inflow in the last quarter, partly due to the easing bias of both the European Central Bank and the Bank of England. US bonds and US equities posted inflows as well, aided by policies geared towards economic recovery and government stimulus.”
Survey highlights of fund managers’ 1Q09 views by asset class
- On equities, 33 per cent of fund managers held an overweight view, down from 50 per cent in the 4Q08. Twenty-two per cent were underweight, down from 30 per cent.
- On bonds, 57 per cent of fund managers held an overweight view, up from 50 per cent in the previous quarter. No one was underweight, down from 20 per cent.
- On cash, 33 percent of fund managers held an overweight view, up from 25 per cent in 4Q08. Seventeen percent were underweight, up from 13 per cent.
Survey highlights of fund managers’ 1Q09 views by geography
- While fund managers were bullish about Greater China equities, they were less so towards emerging markets equities. Only 38 per cent were overweight, down from 56 per cent in the last quarter. Thirty-eight per cent were underweight, up from 33 per cent.
- On Asia-Pacific ex-Japan equities, 44 per cent held an overweight view in 1Q09, down from 56 per cent in the previous quarter. Thirty-three per cent were neutral in 1Q09 versus 22 per cent in 4Q08. The proportion of fund managers holding an underweight view remained at 22 per cent in both quarters.
- On US equities, fund managers views were split with one-third each holding overweight, neutral and underweight views. In 4Q08, half of them were underweight, 30 per cent were overweight and 20 per cent were neutral.
- On high-yield and global emerging markets bonds, the share of fund managers holding an overweight view decreased from 56 per cent to 33 per cent. In 1Q09, 33 per cent were neutral, up from 11 per cent from the previous quarter.
- On US bonds, 29 per cent were overweight in 1Q09, up from 11 per cent. Forty-three held an underweight position, down from 56 per cent from the previous quarter.
- On European bonds, 50 per cent were overweight, down from 56 per cent. Fifty per cent were neutral, up from 33 per cent and zero per cent were underweight, down from 11 per cent.
Ms Tse said: “Due to weak economic data and continued uncertainty in stock markets, fund managers favour bonds, European bonds in particular, on the expectation of further rate cuts. Although there has been a slight improvement in sentiment towards US dollar investment grade corporate bonds, there is concern that interest rate risk of long-term government bonds may have increased as yields of US Treasuries are down to historic lows. On the equities front, fund managers are regaining confidence in Greater China, and sentiment on US equities also improved from negative to neutral.”
For the first time since the survey was launched in 3Q06, HSBC has introduced the HSBC Fund Flow Tracker, which represents cumulative dollar value of money flows covering the past 10 quarters. For equity funds, fund movements tracked market performance, with net inflows from 3Q06 to 4Q07 and net outflows since 1Q08. The movements in bond funds suggest a flight to quality, particularly towards US dollar investment grade corporate bonds and European (incl. UK) bonds, and show investors diversifying their holdings. Stable fund flows in Greater China equities show sustained investor interest in the sector.
Media enquiries to Varanandha Sutthapreeda on 0-2614-4609 or Savittree Muadmuang on 0-2614-4606.
Notes to editors:
1. HSBC in Thailand
HSBC was established as the first commercial bank in Thailand in 1888. With access to global expertise and enriched local knowledge, HSBC in Thailand provides a full range of financial services including global, commercial and institutional banking, global markets, securities services, trade and supply chain, payment and cash management services to corporate customers; personal financial services and credit cards to a growing retail customer base in Thailand. HSBC is globally recognised for its high service standards, ethical practices and full commitment to corporate social responsibilities to benefit the local economy.
2. HSBC Holdings plc or the HSBC Group
Headquartered in London, the HSBC Group is one of the largest banking and financial services organisations in the world. The Group’s international network comprises around 9,500 offices in 85 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa, serves over 100 million customers and has assets of US$2,547 billion as at 30 June 2008. The Hongkong and Shanghai Banking Corporation Limited is the founding and principal member of the HSBC Group.
Footnotes:
1: The 12 participating fund managers in the survey are: AllianceBernstein, Allianz Global Investors, Baring Asset Management, Deutsche Asset Management, Fidelity Investment Management, Franklin Templeton Investments, HSBC Global Asset Management, INVESCO Asset Management, Investec Asset Management, JF Asset Management, Schroders Investment Management and Soci?t? G?n?rale.
2: Net fund flows are derived by subtracting market growth from funds under management (FUM) growth during 4Q08.
3: According to the Investment Company Institute, total global FUM at the end of the third quarter of 2008 was US$21.66 trillion.