Although bank sales of mutual funds throughout Asia ex-Japan may look down now because of poor global economic conditions and the onset of Sars, this region represents the world's fastest growth, says Cerulli Associates, a London-based consultancy. The firm predicts the region's mutual fund assets will grow as high as $560 billion by 2007, up from an estimated $343 billion for 2003.
Year-on-year growth for the industry is hitting a low this year, but it's still estimated to be 9%, as opposed to 15% in 2002 and 21% in 2001. The rate of growth is not expected to bounce back to those earlier levels: Cerulli forecasts asset growth no higher than 14% over the next five years. But compared to the West that's still an enviable compound annual growth rate of 12% through 2007.
Capital-guaranteed mutual funds and similar structured products have dominated fund sales for the past two years in those markets where they are available. But Cerulli predicts that emerging products will help drive growth over the next five years, including retail hedge funds, real estate investment trusts and exchange-traded funds.
Moreover the dominant banks will deepen their hold over mutual fund distribution, Cerulli predicts, with their share of fund assets in Asia ex-Japan to reach 60% by 2007, up from 48% in 2002.
Taiwan catches the consultants' fancy. Even in a bad year like 2002, its fund assets rose 18% from the previous year to $75.9 billion (including offshore). Cerulli predicts mutual fund assets in Taiwan to reach $156.8 billion by 2007, perhaps allowing it to surpass Korea as Asia ex-Japan's biggest funds market.
China's mutual funds market, now at $16 billion, is expected to grow larger than Hong Kong's by 2007, when China's industry hits $48 billion, Cerulli believes.