Fund sales in Hong Kong saw a significant drop between January and July. The Hong Kong Investment Funds Association (HKIFA) yesterday announced that gross and net sales of mutual funds fell by 40.9 percent and 98.1 percent respectively in the first seven months this year.

During the period, equity funds continued to take up the lion's share of the industry, accounting for 66.5 percent of the industry's gross total.

However, gross sales saw a 52 percent drop year-on-year in terms of absolute value.

Meanwhile, European Regional equity funds and Japanese equity funds registered the largest drop in gross sales, down by 92.7 percent and 86.9 percent respectively.

Greater China Region equity funds and Asia Regional (excluding Japan) also reported a heavy drop from $5.08 billion to $1.74 billion and from $4.58 billion to $1.71 billion respectively.

The HKIFA pointed out that Greater China Region equity funds and Japanese equity funds witnessed the biggest net outflows among all equity funds, at $408.44 million and $404.54 million respectively, compared with their net inflows of $1.81 billion and $230 million in the corresponding period of 2007.

A surge in the net sales of global bond funds was recorded. It drew in $596.6 million this year, representing a 10-fold growth year-on-year. Its inflows accounted for 56.4 percent of the total net inflows into bond funds.

The HKIFA said that the fund industry was able to maintain the momentum of robust inflows in the beginning of the year in light of the $3 billion fund inflows in January.

However, the association said that the fund sales have been heading south since February. Only $1.4 billion sales were recorded in July.

Besides, the withdrawal of funds has become more obvious. The fund industry registered net inflows in each of the first five months except for March, but the industry saw a net outflow in both June and July.

The absolute amount of outflows soared from $162.64 million in June to $552.25 million in July.

Owing to a weak global economic outlook and negative implications on corporate earnings, the HKIFA predicted that fund sales will remain at a subdue level for the rest of the year.

However, Hong Kong Institute of Investors Chairman Ricky Tam said the sluggish sales might improve in the fourth quarter when many fund managers tend to embellish their track records.

Tam said he believes the proportions of bond funds and alternative funds will enlarge since the funds are able to hedge against the volatility in the equity markets.

(HK Edition 09/12/2008 page3)