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Published on April 23, 2008

The Nation

International fund managers prized cash for safety over equities and bonds in the first quarter, while still piling up on emerging Asian stocks, according to a survey.

"These views reflect the continued volatile conditions in global stock markets as well as changing investor sentiment, resulting in a shift to more cautious and focused investment strategies," Bruno Lee, HSBC's head of wealth management for personal financial services in Asia-Pacific, said recently.

HSBC's poll of the bank's panel of 10 global fund-management houses found 62 per cent favoured going overweight on cash, up sharply from only 25 per cent in the previous quarter.

Fund managers turned bearish towards equities over the same period as 38 per cent took an underweight view. In the previous quarter, no respondent held an underweight view towards equities.

Within the equities sector, fund managers in the sample were unanimous in taking an overweight view towards Asia-Pacific ex-Japan equities. This was up from 87 per cent in the previous quarter.

The next most popular sector, within equity investments by geography, was Greater China at 75 per cent, down from 87 per cent.

"Investors are tending to keep their liquidity intact, in the event that the market offers more compelling investment opportunities, while at the same time trying to balance their current equity positions by skewing investments to Asia and other emerging markets where there is still scope for growth," Lee said.

Regarding bond investments, half of the sample remained underweight, compared to 62 per cent in the fourth quarter of last year, while 37 per

cent were neutral versus 25 per cent in the previous quarter.

HSBC also conducts a quarterly survey among its 10 partner fund houses to get a better understanding of global liquidity flows and the dynamics of global asset allocation.

Net fund flows are calculated by taking away the impact of market movements to derive a picture of investor activity in the global investment scene. HSBC undertakes this survey to guide customers in making informed investment choices.

The HSBC survey of fund flows indicates that total funds under management of the fund houses in the panel increased by US$94 billion (Bt2.96 billion) or 2 per cent from the third quarter to the fourth quarter of last year.

In the last quarter of 2007, funds continued to move to Asia with Asia-Pacific ex-Japan equities reporting a net fund inflow of 14.3 per cent as investors remained confident about growth prospects in the region over the prospects for equities of developed economies.

This inflow reflects the results of the fund house survey of sentiment towards investment classes and geographies.