Fund managers bullish towards equities in Q3

8 September 2011

| By Angela Welsh |

Most fund managers (63 per cent) polled in the HSBC Fund Managers Survey were bullish towards equities in the third quarter.

The results present a sharp contrast with the cautious second quarter of 2011, when investors focused on bonds.

The quarterly survey also found that 83 per cent of fund managers held a bullish view towards Asian bonds, and 71 per cent reported a positive view of high-yield and emerging market bonds. Fund managers with overweight views towards Greater China equities more than doubled on the previous quarter, rising by 57 per cent.

As the European debt crisis dampened the outlook on growth, 83 per cent of fund managers became bearish on European bonds, and half (50 per cent) were bearish on European equities.

The survey analysed 12 leading fund management houses in July and August 2011 on the basis of funds under management (FUM), asset allocation views and global money flows. At the end of the second quarter of 2011, polled fund managers reported aggregated FUM of US$4.4 trillion, representing approximately 17 per cent of the estimated total global FUM.

HSBC Australia head of global investments Geoffrey Pidgeon mentioned the buying opportunities presented by current market volatility, and added, "While there is continued uncertainty around growth in the US, corporate earnings forecasts remain positive".

He said global fund managers are seeking opportunities in emerging markets, and are focusing on Greater China equities as the market still expects the end of the Mainland's tightening cycle.

As investors searched for yield in a low interest environment, the second quarter of 2011 was marked by continued inflows into bond funds, especially into global and emerging markets/high yield bonds.

Equity funds posted outflows as investors remained cautious due to concerns about the sustainability of the global recovery and developed market debt problems. Even though equity funds and money market funds dropped by US$14.3 and US$12.6 respectively, overall FUM still increased by US$51 billion at the end of the second quarter 2011.

This represented a rise of 1.17 per cent from the first quarter, and was led by a strong increase in bond funds. North America remained the top region for both equity and bond investments in the second quarter of 2011, and Asia-Pacific retained the number two spot as the second largest region for equity investment.