Fund managers neutral towards equities and bonds in Q4 2012

SINGAPORE - Views of global fund managers on equities and bonds for the fourth quarter of 2012 remain unchanged compared to 3Q12, with 50 per cent and 60 per cent of respondents in HSBC's latest Fund Managers' Survey holding a neutral outlook respectively towards the two asset classes.

40 per cent and 20 per cent of fund managers held overweight views towards equities and bonds respectively while 30 per cent held underweight views on cash.

Mr Paul Arrowsmith, Head of Retail Banking and Wealth Management, HSBC Singapore, said the survey shows that global fund managers remain neutral towards equities and bonds, reflecting the nervousness in the market on growth prospects.

"However, with recent monetary easing actions by central banks, including the third round of quantitative easing in the US, bonds remain attractive particularly for the yield-seeking investors. Having said that, equities have long-term appeal underscored by the attractive dividend yield pickup over bonds."

In the last quarter of this year, less fund managers are bullish about North American (60 per cent versus 70 per cent last quarter), European (ex UK) (40 per cent vs 50 per cent), Asia Pacific ex Japan (33 per cent vs 40 per cent) and Greater China equities (43 per cent vs 50 per cent). No fund managers held underweight views on Greater China or Indian equity funds.

Within bonds, the majority of fund managers turned bullish towards Asian bonds, with 75 per cent and 63 per cent of fund managers holding overweight views on Asian USD and Asian local currency bonds, respectively (vs 38 per cent and 25 per cent in the third quarter).

The survey also shows that high yield bonds (90 per cent overweight) and global emerging market bonds (70 percent overweight) continue to be favoured by most fund managers.

Mr Arrowsmith added: "For medium to long term investors, there are potential long term opportunities. Resilient fundamentals and potential monetary easing in the region make Asian income focused assets appealing to investors.

"While safe haven bonds have become more expensive, corporate and emerging market debt fundamentals remain solid. With a strong desire for yield amidst the continued low interest rate environment, fund managers are also looking for opportunities in high yield and global emerging market bonds."

Sten Ankarcrona, Chief Executive Officer of HSBC Global Asset Management (Singapore) said that wiithin the fixed income universe, high yield bonds and global emerging market debt are complementary to a diversified portfolio alongside government bonds.

"Both sub-segments have strongly outperformed developed market government bonds in recent years and continue to offer a competitive yield. Of late, high yield bonds and emerging market debt have been fast-evolving as asset classes in their own right, as the market sees increased issuance and improved liquidity," he said.