Even when valuations are not particularly attractive, Asian investors remain buyers of fixed-income because they are concerned about equities. The report shows how asset allocation remains tricky in this environment.

Jittery investors in Asia are likely to continue putting money into debt-based products, such as global and Asian fixed-income, because of the uncertain outlook for equities amid the pandemic, a report said. 

Asian markets fell in the first three months of 2020, with some indices plunging by double-digit percentages before central bank quantitative easing and hopes of an eventual recovery encouraged a bounce back. 

As most global market indices declined by more than 20 per cent in the first quarter, equity funds’ market share shrank from 23.7 per cent in 2019 to 20.0 per cent in March 2020. Bond and money market funds’ market share widened by 1.0 and 3.7 percentage points respectively, as investors sought safety in such funds, according to Cerulli Associates, the Boston-based research and analytics firm.

The report said that in spite of the potential demand for fixed income, asset managers in Hong Kong, Singapore, Taiwan, India, and Korea surveyed by Cerulli named equity strategies as the top broad strategies which they would like to promote to distributors in 2020. Thematic funds - particularly technology-related themes - are also drawing attention from investors in the region. The study continued to outline that certain exchange-traded funds were boosted as investors were buying at dips. ETFs continue to be popular in Australia and Korea.

Such figures highlight the dilemmas posed by COVID-19 and how investors allocate assets if or when there is a second large rise in the virus, provoking states to impose more suppression methods. The way investors react to volatility also highlights behavioural biases that can arise in times of stress. 

Platforms
In other findings about the Asia market, Cerulli said that although online platforms have gained in popularity, banks remain the dominant channel in most markets, and they are strengthening their digital presence to meet clients’ expectations.

Pension withdrawals in some markets (Korea and Australia) could affect the asset pool. In other markets (Singapore and Hong Kong), measures to increase voluntary contributions could have the opposite effect. Overall, retirement planning remains a key theme across the region.