By Edward Leung
The Hong Kong Investment Fund Association (HKIFA)’s statistics on fund sales for the first half of 2015 indicate strong overall net sales, but a nearly 50% drop in gross sales volume. Due to economic fluctuations in China and an expected US rate hike, Bruno Lee, HKIFA’s chairman, calls for the fund industry to expect an adjustment and that more investors will return to the fixed income market upon the US Fed rate adjustment.
Robust inflow for Q1-2 2015
According to HKIFA’s release, the fund industry registered gross sales of over US$ 47bn in the first half of 2015, up by almost 14% over the first half year of 2014. However, on a net basis, sales dropped by 49.8%, to US$ 3.71bn.
Gross sales hovered at around US$ 7bn per month in the first quarter of this year. Sales soared to over US$ 10bn in April, but were back to US$ 7bn towards the end of Q2.
Among all categories, ‘China equity funds’, ‘Greater China equity funds’ and ‘HK equity funds’ – attracted aggregate inflows of US$ 7.3bn in Q2, accounting for about 28% of the industry gross total. In Q1, they only contributed about 12% of the industry total.
Mild adjustment expected for late 2015
Due to a significant “reverse in fortune”, major adjustments in the China market and the resulting economic mood, Lee calls for the fund industry to expect a quieter Q3 and Q4. He told BENCHMARK: “Due to the ongoing economic climate and factors such as RMB’s depreciation in value, investors’ confidence will be weak and fund sales would not be as hot as the 1st half of the year.”
“On the redemption side, investors will be inclined to wait until the situation is clearer,” Lee added.
For equity fund that forms close to 70% of all fund sales for Q1-Q2 of 2015, Bruno Lee said that the impact of the US Fed’s rate hike is expected to be mild and in fact should be a positive factor for the Q3 and Q4 fund market.
He explained,“ Investors may be inclined to go back to the fixed income market and look for relevant instruments, while non-US$ funds should be more risk averse. Otherwise the market expects only a mild rate hike and investors will still wait for the outcome to decide their next move.” BM