Mutual funds registered for sale in Singapore posted an average return of 3% in September, reversing a -1.01% average decline in August. This was in sync with strong rebounds stock markets worldwide and a larger-than-expected US Federal Reserve interest-rate cut, according to Lipper.

SingaporeÆs equity funds had the best overall returns, averaging 4.59%. Hedge funds were the worst performers, posting an average loss of 0.79%, due in part to currency translation losses from a weaker US dollar.

Sector-wise, September was a favourable month for funds that invest in gold and other precious metals. Gold, which fell to a low of $641.10 per ounce in August, recovered and rose to a 28-year high of $743.70 last month.

China fever is far from over because funds investing in mainland shares were the second best performing last month, posting an average return of 14.31%.

Kenneth Koh, Singapore-based head of research at Lipper, says the 50 basis point US Fed rate cut calmed portfolio investors last month, who were previously preoccupied with concerns over the US subprime mortgage crisis. However, he says the current US monetary policy û which is potentially inflationary û combined with high oil prices may only increase the risk in the financial system over the long run.

ôIt is evident that the credit situation in the US will need some time, if not years, to unwind itself,ö Koh says. ôUntil then, the markets are likely to keep a close watch on developments in the US, including any news of a renewed deterioration in the housing market.ö

Average September performance of fund groups registered for sale in Singapore, by asset types:

Equity Funds +4.59%
Target Maturity Funds +2.24%
Mixed-Asset Funds +2.03%
Bond Funds +0.61%
Guaranteed Funds +0.54%
Hedge Funds -0.79%
Protected Funds -0.10%
Money Market Funds -0.03%

Top 5 fund sectors in terms of performance in September, with their average gain:

Equity Sector Gold and Precious Metals +16.89%
Equity China +14.31%
Equity Australasia +13.42%
Equity Brazil +12.59%
Equity Hong Kong +12.24%

Bottom 5 fund sectors in terms of performance in September, with their average loss:

Mixed Asset USD -3.54%
Equity Sector Real Estate Europe -3.21%
Bond Global Corporates -2.44%
Bond USD Short-Term -2.20%
Money Market USD -2.17%

Top 5 equity funds in September, with gain:

First State Global Resources SGD +18.02%
DWS Noor Precious Metals Securities A USD + 17.59%
HSBC GIF Chinese Equity AD USD +16.67%
Schroder BRIC +16.62%
Schroder ISF BRIC A +16.46%

Bottom 5 funds in September, with loss:

ABN Amro Europe Equity revival -5.37%
Schroder ISF Japanese Smaller Companies -4.54%
PRU Japan Smaller Companies -3.84%
Henderson European Property Securities -3.39%
Henderson HF Pan European Property Equities -3.03%