Funds authorised for sale in Hong Kong gained an average of 9.48% in April, posting their highest average monthly return since December 1993, according to data provider Lipper. No fund groups incurred losses for the month.

The big question on everyone's minds is whether global markets can continue to add to the gains of recent weeks.

In Hong Kong, equity funds posted an average return of 13.29%, outperforming all other fund types. On average, mixed-asset funds gained 6.57%, while bond funds gained 3.37%.

The number of exchange-traded funds (ETFs) authorised for sale in Hong Kong reached 29, with a combined asset size of $14.8 billion as of end-April.

The robust rebound in global equity markets, improved investor sentiment, and the widening of the yield spread between three-month US Treasury bills and 10-year US Treasury bonds suggests that a bull market is returning, says Eric Wong, Lipper's Hong Kong head of research. However, the sharp jump in month-on-month performance has a lot to do with previously low levels and improved investor sentiment, rather than definitive fundamental factors.

"A bull market needs to be fuelled by an expanding economy and several US economic barometers such as the change in non-farm payrolls, capacity utilisation, and housing starts have yet to show that the economic recession in the US has ended," says Wong. "In the near term, global equity markets have now become overbought. Profit-taking and retracement could be imminent."

The rebound of the global equity markets amplified in April as better-than-expected economic and corporate earnings reports lifted confidence that the worst of the slump was over, Wong says.

Meanwhile, commodities funds gained an average of 3% in April. For the second consecutive month they were driven mainly by basic metals and energy prices. Copper futures prices jumped 9.7%, while crude oil futures prices gained almost 3% in April.

According to Wong, data since 1960 show that a bull market usually emerges after both the Dow Jones Industrial Average (DJIA) index and the S&P 500 index have climbed 19% from their multi-year lows. When both equity indices surge above this 19% threshold level, they generally continue to advance at least another 29% in the following years.

With both the DJIA index and the S&P 500 index having now rebounded 30% and 34%, respectively, since sliding to six-year lows in March 2009, has the bull market finally returned?

Looking at the data more thoroughly shows that a bull market has to be supported by several factors simultaneously, says Wong, who adds that some of these factors have emerged.

First, investor sentiment has changed for the better in recent weeks. Instead of dumping assets and securities regardless of their soundness and values, investors have begun to express confidence in the future.

Second, when the last bull market began in March 2003, the yields of three-month US Treasury bills were trading at around 1.2% and the spread over yields of 10-year US Treasury bonds was about 260 basis points.

Third, the spread between the three-month US Libor and the yield on three-month US Treasury bills has begun to narrow in recent weeks. Currently, the spread is trading at 72 basis points, despite still wider than the 50 basis points on average before the bursting of the US subprime loan market, but much better than the 100 basis points reported a month ago.

"An expansionary economy is essential to fuel a bull market," Wong says. "However, there are several important economic barometers, which have yet to show that economic recession in the US has ended and the US economy is on the path of revival."

Wong's short-term prognosis for the market isn't too bullish.

"As for the near term, global equity markets have now become overbought," he says. "Their upward momentum appears abating. Should the pullback of the equity benchmark indices succeed in not ending below the multi-year lows they established in early March, such a pattern will strengthen the bottoming of the equity markets and provide a solid foundation for the bull market thereafter."