Singapore funds post S$1.6 billion in net inflows

CPF portfolios post net inflows in the third quarter after several months of suffering from outflows.
Net inflows to unit trusts in Singapore totalled S$1.562 billion ($1.079 billion) in the third quarter of this year, up from S$1.287 billion ($889 million) in the second quarter, according to a recent Lipper report.

Total fund inflows rose to S$9.056 billion ($6.259 billion) in the third quarter, while outflows reached S$7.494 billion ($5.179 billion).

Equity unit trust net inflows were the strongest at S$1.694 billion ($1.171 billion) in the third quarter, sharply higher than S$630.9 million ($436 million) in the second quarter.

ôFund investors were decidedly divided in their views, with noticeably large redemptions and subscriptions across similar equity groups. The bulls, however, appeared to remain in charge at the end of the quarter,ö says Singapore-based Kenneth Koh, head of research for Asia ex-Japan at Lipper.

The net inflows to equity funds were driven in large part by subscriptions to Asia ex-Japan and regional Asean portfolios, and partly by new money coming into China-related portfolios.

After experiencing persistent net outflows for several quarters, Central Provident Fund (CPF) investment scheme portfolios posted a net inflow of S$20.1 million ($13.9 million) in the third quarter, a turnaround from a net outflow of S$30.7 million ($21.2 million) in the second quarter.

Unlike in Hong Kong where mandatory employee contributions are pooled into investment products, Singapore offers its residents several choices for their pension money, including investing in housing and education.

The US subprime mortgage crisis remains among the main concerns of investors in Singapore and the rest of Asia, says Koh, who believes the US Federal ReserveÆs move to cut its key federal funds target rate is a palliative measure rather than a cure to the credit woes.

The US Federal Open Market Committee cut federal funds target rate by 25 basis points to 4.5% in late-October in a bid to help ease the US credit crisis, following a 50 bps cut in September. Prior to September, the Fed kept its key interest rate steady for nine straight meetings since August 2006.

Koh notes that the FedÆs monetary policy action appears to some industry players as a bailout of the mortgage companies in the US, which û in tandem with higher oil and commodity prices û will only increase risks to the financial systems in the long-run.

ôIt is evident that the credit situation in the United States will need some time, if not years, to unwind itself,ö says Koh.

He notes that recent fallouts from financial giants Citigroup and Merrill Lynch, which have been forced to write of huge sums due to the subprime crisis, illustrate the scale of the issue.

Financial markets are ôlikely to be kept on a relatively tight leashö as investors keep a close watch on further developments in the US, particularly on the housing market,ö he says.

Fund inflows in Singapore by major asset class:

Bond û S$785.1 million
Equity û $6.047 billion
Mixed Assets û S$910.7 million
Money Market û S$1.249 billion
Others û S$64.7 million

Fund outflows in Singapore by major asset class:

Bond û S$777.5 million
Equity -- S$4.353 billion
Mixed Assets û S$517.9 million
Money Market û S$1.168 billion
Others û S$677.7 million
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