HSBC survey: Most fund managers positive on Greater China equities

Tags: fund managers | Greater China equities | HSBC survey

Written by Surin Murugiah

Wednesday, 01 July 2009 14:34

KUALA LUMPUR: Three in four of fund managers polled hold a positive view towards Greater China equities in the second quarter of 2009, up from 67% or two-thirds in 1Q09, according to HSBC’s quarterly fund managers’ survey.

Overall, fund managers in the survey were less optimistic about equities as an investment class with fund managers going underweight rising from 22% in the first quarter of the year to 40% this quarter, HSBC Bank Malaysia Bhd said in a statement on July 1.

It said the sectors seeing some of the biggest shifts in sentiment included European and Japanese equities, adding that for European equities, 36% of respondents took an underweight view (versus 22% in 1Q09).

Fund managers were negative towards Japanese equities with 70% taking an underweight view (against 33% in 1Q09), it said.

HSBC Bank said views towards bonds remained bullish in 2Q09 as seven in ten fund managers held an overweight view compared to 57% in 1Q09.

“More fund managers held overweight views towards all bond sectors, namely 56% for European bonds (versus 50%); 44% for US dollar bonds (versus 29%), 44% for Global Emerging Markets/High Yield bonds (versus 33%) and 38% for Asian bonds (versus 33%).”

“On cash, views shifted moderately from overweight (25% in 2Q09 versus 33% in 1Q09) to underweight (25% in 2Q09 versus 17% in 1Q09),” it said.

HSBC Bank Malaysia general manager of Personal Financial Services Lim Eng Seong said despite strong equity rallies at the end of the first quarter, the global economic outlook remains uncertain and markets will continue to be volatile.

“Fund managers are therefore more cautious and discriminating in their equity allocations to ensure they capture value and growth opportunities while staying focused on the relatively less volatile bonds sector, for quality and stability.”

“Greater China remains the most favoured equities sector as recent economic indicators point to signs that the effects of the stimulus measures are starting to filter through the local economy,” said Lim.

The HSBC survey analysed 12 of the world’s leading fund management houses by their funds under management (FUM), their asset allocation views and their global money flows.

The net money flow estimates are derived from movements in FUM versus index movements in the equivalent class. At the end of the first quarter of 2009, the fund houses covered in the survey reported aggregated FUM of US$2.4 trillion, representing about 12.8% of the estimated total global FUM.

The survey shows that at the end of the first quarter of 2009, FUM decreased by US$102 billion, a drop of 4.05 per cent from 4Q08, said HSBC Bank.

“Equity funds, which decreased by US$85.3 billion, contributed the most to total FUM decrease. Balanced funds and other funds saw a decrease while money market funds posted an increase in FUM,” it said.

According to the survey, net flows of FUM in emerging markets equities narrowed to minus 1.6% at end 1Q09 from minus 9.2% in 4Q08.

Greater China equities added 5.2% in 1Q09 from minus 4.4% in 4Q08, while global equities declined to minus 2.7% from a gain of 3.3%.

Greater China equities posted inflows in the first quarter of 2009 after investors pulled out of this sector late last year, showing increased confidence in the region’s recovery and growth prospects, the survey showed.

Investors’ risk appetite for emerging markets/high yield bonds recovered given early signs of stabilising economies and improving credit markets, it said.

Lim said that while investor confidence has slightly improved, investors remain cautious about the continued uncertainty in the global economy.

Investors should remain in regular contact with their financial advisors to update their strategies with a view to keeping a balanced and diversified portfolio, he said.

“While investors are seeking selective growth opportunities in equity sectors such as in Greater China, they are still cautious as evidenced by their growing interest in more conservative instruments such as high grade corporate bonds.”

“This reflects there is still a flight to quality amongst investors with capital preservations being upper most in their investment priorities until more certain long-term growth prospects emerge in the global economy,” he said.

The HSBC Fund Flow Tracker, which represents cumulative dollar value of money flows covering the past 11 quarters, showed that within the equity funds sector, net inflows were recorded from 4Q08 to 1Q09.

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Last Updated on Wednesday, 01 July 2009 14:37

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