Asia-Pacific fund managers bullish on equities

Half of fund managers with overweight view on equities yet cautiously optimistic towards Greater China.

Half of fund managers polled in the latest HSBC Fund Managers’ Survey, are taking an overweight view on equities in the third quarter of 2010 compared to 40 per cent last quarter. The findings show that irrespective of strong inflows to bond funds, fund managers see enhanced opportunities in selective equities. The quarterly survey indicates that four times as many fund managers hold a more positive view on equities than bonds, with 13 per cent of respondents holding a bullish perspective on the latter.

Specifically, fund managers are taking a positive view towards assets in fast-growing markets, with 44 per cent of respondents bullish on Asia-Pacific ex Japan equities, up from 38 per cent last quarter.

Bruno Lee, HSBC’s Regional Head of Wealth Management Asia-Pacific, said: “HSBC’s Fund Manager Survey shows that no fund manager is underweight towards equities and bonds, despite market concerns over the fragile global economy. Irrespective of strong inflows to bond funds, our research illustrates that fund managers are selectively bullish on equities especially in fast-growing regions including Asia-Pacific which have managed to sustain economic recovery and stimulate economic activity globally. However, due to considerable narrowing of credit spreads, the majority of fund managers are neutral towards bonds this quarter.”

While no fund manager holds an underweight view on Greater China equities, results show that fewer fund managers are bullish about prospects this quarter (50% from 71% in 2Q10) and an increasing number are holding a neutral view (50% vs 29%). While less fund managers are bullish about emerging markets equities (67% vs 75%), more of them are taking a neutral view (33% vs 0%).

Driven by policy risk concerns, Greater China equities recorded outflows of approximately US$625 million in 2Q10, representing the first outflow since the first quarter of 2009.

Mr Lee added: “The quantitative tightening and austere property measures by the Chinese government have impacted investor sentiment and market performance. While uncertainties in the overall global economic landscape will continue to influence investors, the Chinese economy remains resilient and a market pullback may create interesting opportunities.”

Across all asset classes, global bonds continued to post the most significant inflows in 2Q10, totaling US$16.5 billion, 19 per cent lower than previous quarter. Asia-Pacific ex Japan equities recorded inflows of US$1.36 billion, up nine per cent from the previous quarter.

The HSBC Fund Flow Tracker, which represents cumulative dollar value of money flows since 3Q06 showed that equity funds rebounded from the previous quarter. At the end of 2Q10 cumulative net outflows of US$56.1 billion were posted compared to outflows of US$75.6 billion in the previous quarter. Over the same period, bond funds continued to post record cumulative inflows of US$232.8 billion, up 20 per cent from previous quarter. Cumulative net inflows of Greater China equities softened to US$7.45 billion in 2Q10, remaining at similar levels to late 2009 as growth normalises.

Cumulative net inflows from Asia-Pacific ex Japan and Emerging Markets equities remained strong at US$10.6 billion and US$26.9 billion, respectively. Significantly, cumulative inflows of North American equities continued rebounding strongly in the second quarter of 2010 at US$4.8 billion, up 70 per cent from the previous quarter.