Asian Traditional Fun(d) Flows Make Record Gains
"Few things are impossible to diligence and skill...Great works are performed not by strength, but perserverence."
Samuel Johnson (1709 - 1784), writer
Asian beta will continue to attract global fund flows in 2007. According to Citigroup's Asia Pacific Investment Daily, 01.03.07, over calendar year 2006 Asian mutual funds attracted a record US$16.8 billion. Total inflows in December 2006 alone came in at an impressive US$3.2 billion. This made it the third-highest monthly inflow ever, and the highest December on record. All this, when there are historical outflows no earlier than April in any year.
Of note, fund flows into China continued to be impressive. Over calendar year 2006, China funds attracted over US$10 billion, all while the MSCI China index soared 78%. The 2nd and 3rd best performing markets, Indonesia and the Philliippines attracted a combined US$28 billion. In contrast, India experienced a 42% decline in 2006 inflows after capturing the most inflows in Asia during 2005.
The carnage in Thailand is now a little clearer. Foreigners sold US$889 million in equities, US$699 million after the BoT's abortive capital control announcement and US$162 million thereafter. This led to full-year net purchases to come in down 34% Y-o-Y or US$1.8 billion.
Market (beta) performance during calendar year 2006 was impressive throughout Asia - Japan notwithstanding. However, current prices suggest that PE valuations have started to exceed their 5 year average levels...
Performance in US$ price, 12.29.06/PE ratio/5 Yr Avg PE ratio/Std Dev.
MSCI Australia..... 27.1... 14.6... (14.5)...0.9
MSCI China........... 78.1... 15.2... (11.5)...1.5
MSCI Hong Kong. 26.3...18.6... (15.7)...1.6
MSCI India............ 49.0...18.5... (13.2)...2.6
MSCI Indonesia.... 69.9...13.6... ( 8.6)...2.1
MSCI Japan........... 5.1... 17.9... (19.1)... 3.6
MSCI Korea..........11.2... 10.5... ( 8.4)... 1.4
MSCI Malaysia..... 33.1...14.7... (13.8)...1.2
MSCI Philippines. 55.4...14.8... (13.2)...1.7
MSCI Singapore.. 41.9...16.4... (14.9)...2.2
MSCI Taiwan....... 16.3...13.8... (13.5)...2.7
MSCI Thailand..... 6.8... 9.6... (10.2)...1.1
Remember, as global liquidity competes for investment opportunities in Asia, it's long/short equity hedge fund managers WILL benefit from the positive movement in the markets. On the other hand, given the relative P/E positioning of some of these markets it looks like Japan and Thailand might be considered by some investors to be fundamentally "cheap" heading into the start of the year. It will be interesting to see whether Japan, in particular rebounds strongly in 2007. Mahalo.
"Few things are impossible to diligence and skill...Great works are performed not by strength, but perserverence."
Samuel Johnson (1709 - 1784), writer
Asian beta will continue to attract global fund flows in 2007. According to Citigroup's Asia Pacific Investment Daily, 01.03.07, over calendar year 2006 Asian mutual funds attracted a record US$16.8 billion. Total inflows in December 2006 alone came in at an impressive US$3.2 billion. This made it the third-highest monthly inflow ever, and the highest December on record. All this, when there are historical outflows no earlier than April in any year.
Of note, fund flows into China continued to be impressive. Over calendar year 2006, China funds attracted over US$10 billion, all while the MSCI China index soared 78%. The 2nd and 3rd best performing markets, Indonesia and the Philliippines attracted a combined US$28 billion. In contrast, India experienced a 42% decline in 2006 inflows after capturing the most inflows in Asia during 2005.
The carnage in Thailand is now a little clearer. Foreigners sold US$889 million in equities, US$699 million after the BoT's abortive capital control announcement and US$162 million thereafter. This led to full-year net purchases to come in down 34% Y-o-Y or US$1.8 billion.
Market (beta) performance during calendar year 2006 was impressive throughout Asia - Japan notwithstanding. However, current prices suggest that PE valuations have started to exceed their 5 year average levels...
Performance in US$ price, 12.29.06/PE ratio/5 Yr Avg PE ratio/Std Dev.
MSCI Australia..... 27.1... 14.6... (14.5)...0.9
MSCI China........... 78.1... 15.2... (11.5)...1.5
MSCI Hong Kong. 26.3...18.6... (15.7)...1.6
MSCI India............ 49.0...18.5... (13.2)...2.6
MSCI Indonesia.... 69.9...13.6... ( 8.6)...2.1
MSCI Japan........... 5.1... 17.9... (19.1)... 3.6
MSCI Korea..........11.2... 10.5... ( 8.4)... 1.4
MSCI Malaysia..... 33.1...14.7... (13.8)...1.2
MSCI Philippines. 55.4...14.8... (13.2)...1.7
MSCI Singapore.. 41.9...16.4... (14.9)...2.2
MSCI Taiwan....... 16.3...13.8... (13.5)...2.7
MSCI Thailand..... 6.8... 9.6... (10.2)...1.1
Remember, as global liquidity competes for investment opportunities in Asia, it's long/short equity hedge fund managers WILL benefit from the positive movement in the markets. On the other hand, given the relative P/E positioning of some of these markets it looks like Japan and Thailand might be considered by some investors to be fundamentally "cheap" heading into the start of the year. It will be interesting to see whether Japan, in particular rebounds strongly in 2007. Mahalo.
posted by Franklin Scruggins | 5:55 AM
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