Hopes of Averting the U.S. ‘Fiscal Cliff’ lift Mutual Funds in Hong Kong

REUTERS/Bobby Yip

Funds authorized for sale in Hong Kong gained 1.23% on average for November, attributable mainly to equity funds and mixed-asset funds, which climbed 1.57% and 1.04%, respectively. Bond funds gained 0.68% on average.

Fifty-four of the 68 LGC-type equity fund groups posted gains for the month. Equity markets across the globe were generally lifted by optimism that a deal to trim the U.S. budget deficit and keep the U.S. economy from plunging over the fiscal cliff can be reached by Congress and the president. Meanwhile, the investment community anticipated that the Liberal Democratic Party would win the general election in Japan in December. Such anticipation boosted optimism that the Bank of Japan would enlarge its quantitative-easing policy after the election, which helped lift equities in Japan and other countries.

Several equity fund groups delivered exceptionally good returns for the month, including Equity Taiwan (+5.63%), Equity Philippines (+5.19%), and Equity India (+4.31%). In Taiwan, stocks surged on news that the government would introduce measures by the end of 2012 to support the stock market. These measures included injecting US$10 billion into the stock market from state-owned banks and government pension funds. In the Philippines stocks were boosted by the country’s stronger-than-expected GDP growth rate of 7.1% for 3Q2012.

In India stocks climbed as investor sentiment turned positive on growing hopes the government would push through reforms to stimulate growth. These reforms included allowing foreign entry in multi-brand retail, raising the cap on foreign direct investment in insurance, and opening the pension sector to foreign investors. Also, Moody’s maintaining India’s rating outlook at stable and speculation of a weaker-than-expected GDP growth rate at 5.3% for 3Q2012, raising speculation of more monetary easing at the next central bank meeting in December, helped to lift Indian stocks higher.

Thirty-three of the 37 LGC-type bond fund groups posted gains for November. For the fourth straight month, lying at the high end of the performance league table were bond fund groups investing mainly in euro-denominated or European fixed income securities, including Bond EUR High Yield (+2.01%), Bond Eurozone (+1.98%), Bond Europe High Yield (+1.89%), Bond EUR (+1.55%), Bond EUR Inflation-Linked (+1.45%), and Bond EUR Corporates (+1.33%). Once again, this was attributed to the euro’s making gains against the greenback and to government bond yields of peripheral Eurozone countries—especially the PIIGS countries—posting a significant decline for the month. The euro gained 0.7% against the U.S. dollar, and the yields of ten-year Italian and Spanish government bonds declined 9.2% and 5.1%, respectively, after the finance ministers of the Eurozone countries finally reached an agreement to ease the terms of financial aid to Greece. These measures included lowering the rates on bailout loans and giving the country more time to repay its debts.

Apart from Mixed-Asset CNY Flexible (-3.02%), which holds only one fund, the remaining 21 Lipper mixed-asset fund groups all posted gains for November. Mixed-asset funds investing mainly in equities or euro-denominated securities generally delivered better returns than other types of mixed-asset funds.