Hong Kong retail funds recorded gross sales of USD 19.8 billion in the first quarter of 2024, a 69% surge from a quarter earlier, and the highest since the third quarter of 2021, according to data from the Hong Kong Investment Funds Association (HKIFA). Bond funds accounted for nearly half of the gross sales, hitting USD 9.0 billion and more than doubled from a quarter earlier.
Net inflows reached USD 3.8 billion in the first quarter, a sharp reversal of the USD 2.1 billion net outflows from the previous quarter. The first-quarter net sales were also the highest in 3 years.
By asset class, fixed income funds attracted the most net inflows of USD 4.1 billion during the quarter; followed by money market funds (USD 632 million). Both equity funds and mixed asset funds saw net outflows for the eighth consecutive quarter, shedding USD 648 million and USD 502 million in the first quarter of 2024.
Majority of the fund categories posted positive year-to-date returns as of May 18. Europe equities, Hong Kong equities, Greater China equities, and North America equities led the chart by gaining 17.2%, 13.1%, 11.4%, and 10.2% on average respectively. Emerging markets & high yield bonds and global bonds returned 6.4% and 0.3% respectively; while global mixed assets rose an average 4.9% during the same period.
Mr. Nelson Chow, co-chair of the Unit Trust Subcommittee, said, “The year-to-date strong performance in capital markets have bolstered investor sentiments, as evidenced by the consecutive monthly net inflows into funds in 2024. Still, investors seemed to have adopted a cautious approach, favoring fixed income and money market funds over equity funds.”
Mr. Simon Wong, co-chair of the Unit Trust Subcommittee, remarked, “Notably, the net outflows in equity funds and mixed assets in the first quarter almost halved from the last quarter. As the U.S. and Japan stocks continue to rally, we have seen moderate net inflows into global and Japan equity funds in the past few quarters.”
Persistently Strong Net Inflows Into Global and North America Bond Funds
Amongst the 34 fund categories, Global Bonds and North America Bonds captured most of the new money during the first quarter of 2024, netting USD 2.2 billion and USD 2.1 billion respectively. Money Markets ranked third with USD 632 million of net inflows, followed by Global High Yield Bonds and Global Corporate Bonds, which pulled in USD 379 million and USD 157 million respectively in the same quarter.
Japan Equities and Global Equities were the only two equity fund categories with positive net inflows at USD 129 million and 57.8 million respectively in the first quarter. Within equity fund categories, Sectors & Themes Equities (ex-APAC) saw the most net withdrawals at USD 239 million, followed by China Equities (net outflows of USD 180 million) and Greater China Equities (net outflows of USD 131 million).
Asia Pacific Bonds and Asia Pacific Mixed Assets recorded the strongest net outflows amongst fund categories, at USD 599 million and USD 424 million respectively. Both categories have seen net withdrawals for four consecutive quarters.
A More Constructive Outlook
“The resilience of global economy and the prospect of interest rate cuts are poised to favor equities. Nevertheless, the quest for income continues to be top of mind for investors. Against the backdrop of market volatility, investors look to diversify and those with a greater risk appetite are increasingly exploring non-investment grade fixed income assets such as high-yield and emerging market bonds for the potential of higher returns,” Wong said.
“Within Asia, we see growing interests in Japan and India equities as a means to diversify and capitalize on growth opportunities. Hong Kong and Mainland stocks are also drawing more attention in the wake of the recent rebound and attractive valuations. However, markets might remain volatile given the ongoing geopolitical risks and inflation concerns. It is important for investors to stay the course with a diversified and balanced portfolio,” Chow added.
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