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Equity funds were the worst performers, posting an average 10.68% decline. Funds that invest in gold and precious metals equities were the only equity fund classification that delivered a positive return on-average last month. Equity funds with substantial exposure to China stocks suffered the most severe downturn on speculation that the heavy snowstorm in the mainland might drag down economic growth in China.
Commodities funds were driven by the rallies in precious metals and agricultural products. Gold and platinum prices climbed 11% and 14%, respectively, last month as falling US interest rates increased the appeal of these precious metals as hedges against inflation. The price of platinum was also boosted by blackouts and mine disruptions in South Africa. Wheat futures surged 13%, last month while corn futures gained 9% on expectations of surging demand for these agricultural products, which could not be matched by growth in their supply.
Eric Wong, head of Hong Kong research at Lipper, says global equity markets may stage a rebound in the near term since technical analysis indicates they are currently oversold. He notes, however, that it is premature to conclude that they can exhibit a sustainable recovery in 2008, since many economic parameters still indicate that the global economic environment remains very difficult, and some of them have recently depicted signs that economic fundamentals are deteriorating.
With economic parameters portraying a weakening global economy and market confidence remaining fragile, government and investment-grade bonds should continue to attract buying from investors, Wong says. This can be observed by the yield curves of government bonds in many countries, which have further steepened in early February.
Average performance of fund groups registered for sale in Hong Kong in January, by asset types:
Money Market +0.60%
Hedge/Multi Strategies -1.82%
Real Estate -1.84%
Hedge/Long/Short Equity -4.29%
Mixed Assets -4.36%
Top 5 equity funds in January, with gain:
SGAM Fund Equities Gold Mines +7.25%
Investec GSF Global Gold +6.74%
MLIIF World Gold Fund +6.01%
JF Ultra Japan +4.48%
JF Indonesia Fund +1.51%
Bottom 5 equity funds in January, with loss:
Parvest Turkey C EUR -23.26%
Baring Hong Kong China USD -23.36%
Hang Seng Index Leveraged -24.07%
Celsius China Accelerated Growth HKD -24.97%
Hang Seng China H-Share -33.86%
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
Insto roundup: GPIF staff say J-Reits more attractive than traditional assets; Hong Kong's strict Spac criteria
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.