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Asian equity fund sales reach USD10bn in Q1

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Net equity fund sales in Asia rose strongly in the first quarter to over USD10bn, according to Lipper FMI’s latest Fund Flash.

Sales were two and half times the level of the previous quarter.

However, the picture was not so rosy in other asset classes and overall new business stagnated.

Total sales fell to a modest USD9bn, less than a quarter of the flows seen in the final three months of 2009. They were also down on the same quarter last year.

The main reason was the outflow from money market funds which totalled nearly USD15bn, almost as much as had flowed into this asset class in the previous quarter. Meanwhile, sales of bond funds more than halved.

In China, equity fund sales rose by 30 per cent to USD7.5bn. Even though the stock market, as measured by the CSI 300 Index, lost ground in January, investor confidence was restored when share prices picked up again in February. And in March the National People’s Congress helped to resolve most of the policy uncertainties which had been plaguing investors in recent months.

In Hong Kong equity fund sales also improved significantly. But not all investors in the region were sure about equities. In Australia equity fund sales halved in the quarter, and in South Korea outflows from equity funds continued, albeit at a reduced rate. Thai investors also took more money out of equity funds than they invested.

The region’s most enthusiastic fund investors were the Japanese. They bucked the general trend with a six per cent rise in overall sales. One reason was their change in sentiment towards equity funds with investors moving USD1bn into this asset class during the quarter. The Japanese also maintained their love affair with bond funds, notably emerging market bond funds, although their ardour did cool somewhat compared with the previous quarter.

The main culprits behind the large money market fund outflows were Chinese and Indian investors. In China, redemptions may have been influenced by the impending introduction of exit charges at the end of March.

In India, more than USD10bn was taken out of money market funds, and there were also significant outflows from bond funds. Most of the withdrawals were in March when the Indian fund industry recorded its highest ever net outflows. Quarter-end redemptions are normal in India as banks and companies take out the excess cash they have accumulated in fixed-income and cash funds during the quarter. March is also the end of the tax year when many fixed-term plans reach maturity.

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