Asset management markets tracked by Cerulli Associates in Southeast Asia -- namely Singapore, Malaysia, Thailand, Indonesia, Philippines and Vietnam -- have emerged less battered by the fund exodus of 2008 than many of their neighbours in North Asia.
In its Southeast Asia asset management report for 2009, the Boston-baseMd financial services consulting firm values the region's combined mutual fund assets at $82.5 billion at the end of 2008. That's a sharp drop from 2007's figure of $84 billion, particularly since Cerulli didn't include Singapore in its Southeast Asia figure that year.
Mutual fund assets and outsourced institutional assets in Southeast Asia declined by 18% and 21% in 2008 respectively. While steep, the declines in assets are tame compared with the 40% to 70% falls in the benchmark stock indices in these markets last year.
Southeast Asia also fared better than many neighbouring North Asian countries. For instance, over the same time period, China's mutual fund assets shrunk by 43%, Taiwan's by 37%, and Japan's by 29%.
Cerulli attributes this to the relatively conservative portfolios of retail and institutional investors in Southeast Asia. Within the region, Malaysia, Thailand and Indonesia even posted mutual fund net inflows in 2008.
Southeast Asia has several growth drivers, Cerulli notes, including Islamic finance developments in Malaysia, the demand for high-yield bond funds in Thailand, and the success of Indonesian local banks with capital guaranteed funds.
Thailand was the largest Southeast Asian mutual fund market in 2008, with almost half of the region's AUM, but with the lowest margins. In contrast, the Philippines is home to just 4% of the region's mutual fund assets.
The latest figure for total Southeast Asian mutual fund assets represents a 21% average growth in the four years to 2007, followed by an 18% contraction in 2008. Last year's dismal numbers reflect the performance of the local and global markets.
In general, however, Cerulli believes that the appeal of Southeast Asian markets -- namely, their large populations, rising middle class, low but expanding investment penetration, and burgeoning retirement sector -- all remain intact despite the current global crisis. Coupled with the fact that mutual fund investments here have not been tarnished by steep losses, this region should remain very much on managers' radars as they seek to expand their Asian operations, the firm adds.
In Malaysia, mutual fund assets dropped by 13.4% to RM 62.1 billion at end-2008 from a high of RM 71.8 billion at end-2007, according to Cerulli, bringing its five-year annual growth rate to 16.6%.
"Among the mutual fund markets of Southeast Asia, Malaysia remains the most promising for foreign fund managers with or without a local presence," Cerulli says, adding that its sharia industry and friendly regulatory environment are among that market's strengths.
In Thailand, mutual fund assets totalled Bt616.3 billion at end-2008, 15% lower than the previous year. All major asset classes enjoyed positive net inflows in 2008, but fixed-income funds received the greatest investor interest, a trend that has been in place since 2005 given the shift into mutual funds by depositors hungry for higher yields, according to Cerulli.
"The global financial crisis appears to have made a small, and in all likelihood, very temporary dent on investor sentiment. The search for higher interest rates and non-taxable income has engendered a large shift of assets from cash to bonds, while a small group of more aggressive investors will continue to seek opportunities in local, and increasingly, foreign, equity markets," Cerulli says.
There are, however, a number of local managers that are content with restricting themselves to fixed-income, preferring to seek more innovative fixed-income products than to venture into equities. Even domestic equity investing is a field in which some local managers have little expertise and, they would argue, no real incentive to play in, Cerulli adds.