Global fund managers bullish on outlook for Thailand, other emerging markets: HSBC
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Thailand and other emerging markets should brace for further hikes, as major global fund managers in a HSBC survey are bullish on their outlooks.
Fifty seven per cent of global fund managers, versus 75 per cent in the first quarter, covered in HSBC’s latest survey continue to favour equities in the current quarter, with no one holding underweight views towards this asset class.
Some 14 per cent turned overweight towards bonds and cash in the second quarter, from none in the previous quarter. Forty-three per cent five fund managers hold an underweight view towards bonds and cash compared to 38 per cent and 63 per cent, respectively, in the first quarter.
Vineet Vohra, HSBC’s regional head of wealth development, Asia-Pacific, said global fund managers generally remained optimistic about the prospects of equities.
Emerging markets’ equities, including Asia, continue to be attractive as a result of better fundamentals. However, it is worth noting that some managers have turned cautious due to renewed concerns on the euro-zone debt crisis, he said.
Emerging markets’ equities are back in the spotlight in the second quarter as more than half of fund managers, or 57 per cent, hold positive views, compared to only 29 per cent in the previous quarter.
Preference for North America equities dropped from 75 per cent to 57 per cent, while Asia-Pacific equities, excluding Japan, are favoured by 50 per cent of fund managers, up from 43 per cent.
No fund manager is underweight on greater China, emerging markets and Asia equities, while 14 per cent are underweight on North America equities, versus 25 per cent in the first quarter.
Asian local-currency bonds favoured
In terms of bonds, 75 per cent of fund managers favoured Asian local-currency bonds, given the region’s stronger fundamentals and potential currency appreciation.
With the US dollar under pressure from the Fed’s continued support for quantitative easing, four in five fund managers are underweight on dollar-denominated bonds and none of them holds an overweight view towards this asset class.
Funds under management (FUM) across 10 of the world’s leading fund-management houses polled reached almost US$4 trillion (Bt114.8 trillion) at the end of the fourth quarter last year, up by 3.2 per cent or $124 billion, from the previous three months.
Bond funds were the major contributors to the FUM growth, representing 40 per cent of the increase. Bond funds also recorded the second-largest net inflow since 2008, totalling $55.9 billion, of which Asian bonds grew 11 per cent.
Equity funds continued to record a net outflow of $13.4 billion in the final quarter of last year, the 10th consecutive quarter, as investors were concerned about uncertainties from the European debt crisis and the US fiscal talks.
All equity and bond markets except North America equities and global bonds recorded positive returns in the fourth quarter of the year. Greater China equities were the best performer with 12.9-per-cent growth, followed by Europe including UK equities (+7 per cent), and Asia-Pacific, excluding Japan equities (+6 per cent).
On fixed income, Europe including UK bonds recorded a 4.6-per-cent return, and high-yield/emerging-market bonds went up 3.9 per cent.
Vohra added that greater China equity funds had suffered a net outflow of over 17 per cent as investors likely took profit from the strong market rally in the fourth quarter last year.
Except for this, emerging-market equities are generally in good shape and continue to attract inflows with Asia-Pacific excluding Japan equity funds having net inflows for the first time since the third quarter of 2011, driven by its relatively resilient economies.
The strong flows to bond funds reflect that investors are still seeking yield amidst the low interest-rate environment, he said. “As no asset class will outperform all the time, investors are advised to avoid over-exposure to any particular asset class and adopt the principles of asset allocation and diversification in their financial planning.”
The 10 participating fund managers in the survey are: AllianceBernstein, Allianz Global Investors, BlackRock, Eastspring Investments, Fidelity Investment Management, Franklin Templeton Investments, Invesco Asset Management, JP Morgan Asset Management, Pimco and Schroders Investment Management.
