Macquarie Fund Flow Tracker

Macq new product: Fund Flow Tracker
Asian funds have increased weight on Indo market from April to May. The still relatively elevated cash holdings also suggest any market pullback may not be large.

Money continues to flow into Asian equity markets. The latest EPFR data show that US$3.9bn flowed into the Asian funds in their sample over the last month. This brings the 2Q09 total to US$12.7bn, the largest quarterly inflow since data collection began in 2001. This represents 9.3% of the total net asset value of the funds surveyed and is in stark contrast to 4Q08, when the funds saw outflows of US$4bn (or 4.4% of total assets).

Cash holdings remain high. Fund managers currently have 2.85% of their portfolios in cash. While the level of cash holdings has been falling during the recent rally, it is still high relative to history (the long-run average is 2.4%). This may suggest that investors remain cautious about the rally. This is consistent with the recent findings of our quant team that show that liquidity is a big factor presently supporting stock-price performance, indicating investors are staying close to the exits.

Retail participation has been rising. The recent strong rally in Asian equities was not only driven by inflows from institutional investors but also by an increase in retail investor participation. This has been particularly pronounced in Taiwan and Korea . The low returns on alternative investments, such as bank deposits, as well as the strong market momentum, were two likely drivers of the increase in retail investors’ participation.