The fund industry registered gross sales of US$54.5 billion in the first eight months of 2020, down by 16% from the same period of last year, according to the Hong Kong Investment Funds Association (“HKIFA”). On a net basis, the industry saw net outflows of US$3.7 billion during this period.
Mr. Nelson Chow, Chairman of HKIFA, said “in March, WHO characterized COVID 19 as a pandemic. Investors were worried that the outbreak would have devastating impact on the global economy, thus quickly took risk off the table. As a result, the industry recorded net outflows of US$8.4 billion in a single month of March.”
“However, global central banks have responded swiftly by adopting dovish monetary policies as well as by introducing other supporting measures. With interest rates maintained at historical low levels, investment sentiment has started to improve and global asset prices start to rise. Since April, the industry has almost consistently registered monthly net inflows. In total, between April and August, the industry registered robust aggregate net inflows of US$1.5 billion, and the trend has remained positive. In the newly issued fund sales report, gross sales in August was at US$6.8 billion, up by 48% from the April low of US$4.6 billion.”
On a year-to-date (YTD) basis, bond funds were the key contributor to gross fund sales, accounting for about 48% of the industry total.
In March, the bond category experienced the worst outflows of US$7.3 billion as investors took risks off, but it quickly recovered thereafter (April to August net inflows totaled at US$3.8 billion). On a YTD net basis, the bond category still saw net outflows of US$2.3 billion. However, since April, bond funds have registered net inflows in each of the following month, and the level of inflows has gone from strength to strength.
Amongst the bond categories, three sub-categories have in particular garnered strong gross inflows since April, namely Global, Asian and high yield bond funds. On a net basis, they attracted US$696 million, US$2,815 million, and US$345 million between April and August respectively. Asian bond funds have in particular attracted very strong inflows in Q3.
Amongst all the key fund categories, equity funds came second, attracting gross inflows of about US$16 billion, accounting for close to 29% of the industry total. Compared with the same period of last year, gross sales enjoyed a 52% increase.
While equity funds as a whole still saw net outflows, at US$797 million, this already represented a major improvement over 2019, when US$3.9 billion of net outflows were registered.
Different from bond funds, equity funds did not see substantial outflows in March: only at US$18 million in March. However, since May, they have been experiencing continuous outflows; though the level in July and August has moderated as compared with that registered in May and June.
Compared with the same period of 2019, balanced funds saw a modest increase of 11% in gross sales, reaching US$10.7 billion.
Continuing the trajectory in 2019, they registered net outflows of US$682 million, though this was much lower than the US$4.4 billion registered in 2019.
Net outflows spiked in March and reached US$1 billion. Outflows dropped off to US$88 million in April; but picked up in subsequent months, and hovered between US$300 and US$400 million per month.