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Growth of Asian mutual funds, ETFs is slowing

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The phenomenal gains enjoyed by Asian emerging market equities in recent years appears to be coming an end, a change that may dampen enthusiasm among U.S. investors and advisors once keen on emerging markets.

The latest evidence of a slowdown comes from Cerulli Associates, which reveals in a new report that Asia-Pacific long-term mutual funds managed to grow only 0.6 percent in July, rising to $2.146 trillion in assets under management (AUM) from $2.134 trillion. The September report, “The Cerulli Edge — Asian Monthly Product Trends Edition,” also shows exchange-traded funds under management declining to $142.4 billion from $143.2 billion, a -0.5 percent contraction.

“The engines of growth — Southeast Asian markets — saw weak gains in assets, with the largest being Singapore at only 1.7 percent, the report states. “Moreover, Asian currencies were generally weaker against the U.S. dollar, adding to losses.”

Cerulli has observed a deceleration in growth of Asian mutual funds and ETFs since March, when the two asset classes experienced AUM growth rates of 5.5 percent and 4.9 percent, respectively. Since then, AUM growth rates dipped to 2.0 percent (mutual funds) and 0.6 percent in April (ETFs), 2.6 percent and 0.04 percent in April, and 0.8 percent and (-1.8 percent) in June.

Contributing to the slowdown in asset growth are concerns over the looming tapering of asset purchases by the U.S. Federal Reserve, which Cerulli reported earlier this month have negatively impacted market sentiment in Asia.

Bucking the trend, in July the report observed a modest rise in Asian long-term foreign-invested mutual fund assets under management. These funds rose by 0.5 percent to $503.2 billion from $500.6 billion in June.

Excepting July, however, AUM growth rates of the foreign-invested funds mutual funds have also been on a downward trajectory since March. The growth rates over this time frame were 2.3 percent in March, -1.2 percent in April. -0.9 percent in May and -5.1 percent in June.

By asset class, equities totaled $875.5 billion (42.2 percent) of long-term mutual fund AUM in the region. Bonds, mixed assets, property and other asset classes constituted 25.1 percent, 24.3 percent, 3.1 percent and 5.3 percent, respectively.


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