HSBC: More managers bullish on China equities

Seventy-five percent of managers polled in HSBC’s second quarter Fund Managers Survey are holding a positive view towards Greater China equities.

The number rose from the 67 percent positive response in the first quarter survey. Overall, fund managers in the survey were less optimistic about equities as an investment class with fund managers going underweight rising from 22 percent in the first quarter of the year to 40 percent this quarter.

The sectors seeing some of the biggest shifts in sentiment included European and Japanese equities. For European equities, 36 percent of respondents took an underweight view versus 22 percent in the first quarter. Fund managers also went negative towards Japanese equities with 70 percent taking an underweight view versus 33 percent in the first quarter.

Views towards bonds remained bullish in the second quarter as 7 in 10 fund managers held an overweight view compared to 57 percent of the respondents in the first quarter.

Bruno Lee, HSBC’s Head of Liabilities Business and Wealth Management for Personal Financial Services in Hong Kong, said: "Despite strong equity rallies at the end of the first quarter, the global economic outlook remains uncertain and markets will continue to be volatile. Fund managers are therefore more cautious and discriminating in their equity allocations to ensure they capture value and growth opportunities while staying focused on the relatively less volatile bonds sector, for quality and stability. Greater China remains the most favoured equities sector as recent economic indicators point to signs that the effects of the stimulus measures are starting to filter through the local economy."

The HSBC survey analysed 12 of the world’s leading fund management houses by their funds under management, their asset allocation views and their global money flows.

Greater China equities posted inflows in the first quarter of 2009 after investors pulled out of this sector late last year, showing increased confidence in the region’s recovery and growth prospects. Investors' risk appetite for emerging markets/high yield bonds recovered given early signs of stabilising economies and improving credit markets.

Mr Lee said: "While investors are seeking selective growth opportunities in equity sectors such as in Greater China, they are still cautious as evidenced by their growing interest in more conservative instruments such as high grade corporate bonds. This reflects there is still a flight to quality amongst investors with capital preservations being upper most in their investment priorities until more certain long-term growth prospects emerge in the global economy."