A survey of global fund managers conducted by HSBC finds investors increasingly bullish on Asian fixed income, while sentiment towards Asian equities is mixed.

The survey of 13 global buy-sides finds 75% of managers intend to overweight Asian US dollar-denominated bonds during the fourth quarter of 2012. That is up from only 38% indicating such a position in a similar survey conducted three months ago.

The trend holds true for local-currency debt as well, with 63% of those surveyed intending to be overweight their holdings, versus 25% saying so last quarter.

Although managers may be bullish on Asian debt, they report negative fund flows over the first half of 2012. Of the managers surveyed, Asian bonds saw net fund outflows of -2.1% in Q1 and another -0.5% in Q2. From a flow point of view, the big winner was emerging market debt and high yield.

Overweights to Asia appear to be at the expense of European bonds: a complete 100% of respondents say they are underweight Europe, just as they were three months ago; and European bond funds have experienced heavy net redemptions among these managers.

Eric Fu, head of wealth development at HSBC in Hong Kong, says Asia is attractive to medium and long-term investors: “Resilient fundamentals and the potential for monetary easing in the region make Asian fixed-income assets appealing.”

However, with the exception of India, the picture for Asian equities is more bearish. 11% of fund managers now report underweight positions for Asia-Pacific ex-Japan equities, as opposed to being neutral in Q3. This is matched by actual flows: these 13 managers report net outflows from Asian equities of -4.3% in Q1 and -6.6% in Q2 this year.

On Greater China equities, 43% of surveyed investors say they are overweight this quarter, a moderate decrease from 50% from the last quarter. (Flows in Greater China equities are more neutral.)

One of the most notable swings is India. Three months ago, 38% of managers said they were underweight Indian stocks. Today, none do, while 17% are now overweight.

This reflects the recent flurry of liberalising moves by New Delhi to curb the government budget deficit and open sectors such as retail and airlines to foreign investors. The government was rewarded by an 8% rise in the BSE India Sensex over the course of September.

However, Western markets remain in favour for equity investors, with 60% overweight North America and 40% overweight Europe – although in both regions, the overweights have come down over the past quarter, suggesting some managers are taking profits. Global equity funds among these managers report net outflows from global equity and US equity products, with a modest 0.8% net inflow to European equities in the second quarter.

Overall, the 13 surveyed fund management houses polled had assets under management of $4.1 trillion by the end of Q2, down 3.3% from the previous quarter, with market valuation losses and net redemptions among equity funds responsible for the biggest share of that decline, says HSBC in its report.

The 13 surveyed fund managers, which account for 16.3% of global AUM, include AllianceBernstein, Allianz Global Investors, Amundi, Baring Asset Management, BlackRock, Eastspring Investments, Fidelity Investments, Franklin Templeton, HSBC Global Asset Management, Invesco, Investec, JP Morgan Asset Management and Schroder Investment Managers.