December 4, 2012

Uncertainty Surrounding Monetary Policy Influenced Q3 Fund Flows in Singapore

by eric.wong.

Singapore Exchange

REUTERS/Tim Chong

In the third quarter, Unit Trusts registered for sale in Singapore, in aggregate, registered a net inflow of S$622.42 million. Bond funds, mixed-asset funds and money market funds recorded a net inflow of capital for the quarter. 

Bond funds continued to attract the largest amount of capital inflow for 3Q 2012. They accounted for 57.38% (S$2,740 million) of the overall capital inflow into unit trusts compared to 15.49% (S$739.66 million) for money market funds. However, bond funds also continued to represent the biggest source of capital outflow for 3Q 2012 at 39.34% (S$1,634.00 million) of the overall capital outflow of unit trusts.  

Equity funds represented 13.51% (S$645.18 million) of total capital inflow and 32.00% (S$1,328.81 million) of total capital outflow for the third quarter.  Capital inflow of equity funds declined S$50.90 million or 7.31% from 2Q 2012 to 3Q 2012. Capital outflow of equity funds climbed S$313.14 million or 30.83% for the same period. 

The capital inflow of mixed-asset funds increased 5.71% from S$600.95 million for 2Q 2012 to S$635.26 million for 3Q 2012. Such a growth rate substantially lagged the growth rate recorded for the outflow of this asset-type fund group at 96.81% for the quarter.

The inflow of capital for 3Q 2012 differed substantially from the figure recorded for the previous quarter, representing an increase of S$966.57 million or 25.38%. The outflow of capital also gained S$1,026.88 million or 32.85%. The major source of their growth continued to be derived from non-CPFs, which grew 25.76% for inflow and 32.56% for outflow, respectively, from the preceding quarter. 

These findings–especially regarding the large net capital outflow for equity funds on a quarterly basis–might be attributed to investors’ skepticism over monetary policy. Investors appeared to be uncertain as to whether the European Central Bank’s Outright Monetary Transactions or the Federal Reserve Board’s new round of quantitative easing would ultimately be approved for roll-out.  Draghi and Bernanke had repeatedly assured the investment community of their intention to implement these measures in July and August 2012.  While these additional monetary stimuli were permitted for implementation in early September, the capital flow in the Singaporean fund market might not yet have had sufficient time to reflect the impact of these measures for 3Q 2012.

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