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Much less new money went into unit trusts in Singapore in the second quarter, while outflows were fairly stable. Total fund inflows amounted to S$6.57 billion ($4.69 billion) in the second quarter, down from the S$7.52 billion ($5.37 billion) in the first quarter. Outflows were relatively flat at S$6.29 billion ($4.49 billion) from S$6.23 billion ($4.45 billion) in the same period in review.
ôInvestorsÆ fears about the renewed credit crisis and weak economic performance, especially in the continuing housing slowdown and weaker labour market, stayed intact,ö says Suthee Luangaramkul, a Bangkok-based Lipper research analyst.
During the second quarter, markets worldwide were hit by more write-downs and downgrades of key financial institutions. Global crude oil soared to a new record above $140.00 per barrel, increasing concerns about global inflation.
Overall fund flows were hurt by sharply lower inflows to fixed-income funds. The negative impact of a surge in bond yields forced investors to redeem fixed-income offerings, leading to a net outflow of S$61.5 million ($43.9 million) in the second quarter. In contrast, fixed-income portfolios posted a net inflow of S$574.3 million ($410.2 million) in the first quarter, with a strong focus on both domestic Singapore-dollar offerings and global bond portfolios investing in sovereign issues.
Equity fund flows improved to a net inflow of S$212.7 million ($151.9 million) in the second quarter from a net outflow of S$85.7 million ($61.2 million) in the first quarter.
ôEven though the overall market stayed under a cloud, the relatively lower market volatility in the second quarter, coupled with attractive cheap valuations, lured some less cautious investors to enter the market,ö Luangaramkul says.
The increase in inflows to equity funds came largely from subscriptions to global emerging markets portfolios, particularly those that invest in Asian markets.
Meanwhile, approved products under the CPF Investment Scheme (CPFIS) ended the second quarter with a net outflow of S$86.7 million ($61.9 million), a sharp turnaround from the net inflows of S$80.5 million ($57.5 million) in the first quarter. The significant net outflows for CPFIS were caused by a noticeable drop in the amount of subscriptions. CPFIS inflows as a percentage of total fund flows slipped to 4.8% at S$312.8 million ($223.4 million).
ôThe increased risk aversion is likely to lead to even more cautious participation in fund markets. Bond funds may drop further in anticipation of further rate hikes,ö Luangaramkul says. ôHowever, the series of equity market fallouts has induced more attractive valuations in the markets, which have brought bargain investors into the market.ö
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