Mutual funds registered for sale in Hong Kong posted an average loss of 2.89% in November, following an average return of 4% in October, according to Lipper data. Equity funds were the worst performers, posting an average 5.15% decline.

Commodities funds on average reported a positive return of 1.64% in November, with agricultural products contributing the main bulk of their returns. Agricultural products such as soybeans and wheat rallied on speculation of rising demand from China and falling inventories.

Apart from Equity Indonesia, Equity Sector Pharmaceutical and Healthcare, Equity India, and Equity Spain, all equity fund classifications tracked by Lipper posted losses on average last month.

In Indonesia, the stock market was supported by expectation that corporate earnings growth, particularly from the agricultural and mining sectors, would remain satisfactory, Lipper says. Pharmaceutical and healthcare stocks, unlike stocks in other sectors such as banking and construction, were perceived to be less affected by the economic cycle and the turbulence in the stock markets. Their returns often outperformed those of other types of equity funds when the global equity markets underwent a correction.

In India, the stock market was supported by a robust economy, with the annualized GDP growth rate reaching 8.9% in the third quarter and inflation declining to a five-year low, which aroused speculation that the central bank might imminently halt interest rate hikes. With these factors, coupled with exports accounting for about 25% of the countryÆs GDP and the government reiterating its plan to spend$500 billion over the next five years on infrastructure, investors generally believed the stock market could withstand the storm triggered by the subprime loans meltdown in the US, Lipper says.

Eric Wong, head of Hong Kong research at Lipper, says catalysts such as window dressing by fund houses may sustain the recovery of the global equity markets in December, but their long-term prospect remains dependent on economic fundamentals and corporate earnings growth, which are currently still being affected by subprime loan-related issues.

ôThe slide among global equity markets appeared to have ended in late November, and equity markets have been staging a recovery since,ö Wong says. ôWith their prevailing one-year forward price/earnings ratios generally remaining close to their historical lows and the window-dressing season by fund houses approaching, the prevailing recovery of the global equity markets may be sustained into December.ö

Wong notes falling home prices and rising property foreclosures in the US are not showing any signs of stabilizing, confirming that economies of the developed countries are slowing. If more data is released showing further deceleration of the global economy or a deterioration of the credit market, corporate earnings growth will be subject to further downgrades, Wong says, and this could trigger another round of selling for many asset classes and bring down their prices.

Average November performance of fund groups registered for sale in Hong Kong, by asset types:

Money Market +0.91%
Bonds +0.90%
Guaranteed -0.27%
Protected -0.49%
Hedge/Multi Strategies -0.87%
Hedge/Long/Short Equity -1.30%
Mixed Assets -2.03%
Real Estate -2.04%
Equity -5.15%

Top 5 equity funds in November, with gain:

Allianz GIS RCM Indonesia + 8.34%
LG India Equity India +6.21%
JF India Smaller Companies +4.92%
AllianceBernstein-India Growth +3.85%
AIG Global Funds - AIG India +2.55%

Bottom 5 equity funds in November, with loss:

Wise- CSI 300 China Tracker -14.68%
Celsius China Accelerated Growth -14.69%
Gam Star China Equity -15.91%
iShares FTSE/Xinhua A50 China Tracker -16.44%
Hang Seng China H-Share Index Leveraged -21.20%

Top 5 bond funds in November, with gain:

Parvest Japan Yen Bond +5.02%
UBS (Lux) Bond Fund +4.92%
Baring Directional USD +4.69%
MFS Meridian Funds Inflation Adjusted Bond +4.33%
Schroder ISF Global Inflation Linked Bond EUR +4.25%

Bottom 5 bond funds in November, with loss:

First State Global Emerging Markets Debt III Bond -2.54%
Morgan Stanley EM Domestic Debt A USD Bond -2.78%
ABN Amro Global Emerging Markets Bond USD -3.49%
Principal GI Preferred Securities -3.92%
Manulife Global Funds - US High Yield Bond -5.24%