Confidence in Asia wanes

Confidence in Asian equities has taken a bearish turn in the third quarter of 2008, as fund managers switch to overweight positions in cash and bonds, according to the HSBC global fund manager survey.

The study found that 22 per cent of fund mangers held underweight positions on Asia-Pacific ex Japan in the third quarter. This is in stark contrast to no fund managers holding underweight views on Asia in the second quarter survey.

The view of equities in general faired poorly, with 44 per cent of the respondents taking underweight positions on equities in the third quarter, compared to only 10 per cent in the second quarter. In contrast, 44 per cent of respondents took an overweight position on bonds in the third quarter, compared to only 20 per cent in the second quarter.

According to HSBC, during the second quarter of this year, the total estimated net fund outflow reached US$28.5 billion, equating to a drop of 0.67 per cent of funds under management (FUM) from the first quarter.

HSBC Bank Australia head of funds and investments Charles Genocchio said the level of fund outflows in the second quarter were indicative of investors’ concern about the warning signs of inflation and economic slowdown in Asia.

“Investors continue to take conservative positions, moving away from volatile equity markets to the safe havens of bonds and cash,” he said.

“The outlook among fund managers reflects the continuing dampened sentiment and market weakness. Their views for the third quarter indicate a retreat to bonds and cash from a temporary positive take on equities in the second quarter.”

The 12 funds management houses surveyed in the report accounted for 17 per cent of the estimated total global FUM, which was an aggregated amount of US$4.2 trillion.