Equity Funds Recovering From Big Losses
By Yoon Ja-young
Staff Reporter
Equity funds, the biggest hit item in the financial industry a few years ago, caused investors many sleepless night last year. Many had their equity funds fall to half of their value following the stock market crash last autumn, and there were reports of couples delaying marriage due to huge financial losses.
However, the funds are recovering as the KOSPI, which once fell to around 900 points, has slowly gained strength and breached the 1,300 mark recently. Some investors have taken this as a cue to exit from their funds, as economic uncertainties continue.
According to analysts, funds investing in the local bourse have reaped about a 15-percent return on average so far this year, with some recording over 20 percent. Funds investing in semiconductors have seen returns of around 50 percent.
Overseas funds are also performing impressively. Equity funds investing in India, which had been marginalized from the recent bullish move, recorded nearly a 5-percent return in only one week on improving economic indices in the United States and Europe.
Brazil funds have recorded over a 20-percent gain so far this year; and Russia funds, around 15 percent on expectations that demand for natural resources will rise following a global economic recovery. Crude oil, which dropped to $35 per barrel, has recovered to around $50.
Investors have been particularly paying attention to China funds recently, with over 300 billion won invested this year. The Chinese bourse had plummeted on concerns that its export-driven economy would be hit due to faltering demand in the United States. However, it is now expected to be the growth engine of the global economy following a powerful stimulus package. ``Abundant liquidity, the recovery of economic indices and expectations of policies are working positively on the Chinese bourse,'' said Meritz Securities strategist Kim Sung-hoon.
However, some investors are taking the rebound as an opportunity to leave fund investment. According to the Korea Financial Investment Association, local equity funds had 26.2 billion won of net outflow Monday, compared to 50 billion won outflow in April.
Analysts estimate that the withdrawal started as the index reached a level where investors could bear taking losses. ``There was an outflow of money from equity funds after the KOSPI breached 1,200 points,'' said Park Hyun-chul, an analyst at Meritz Securities. He added, however, the outflow won't expand much, as inflows into the installment funds will continue.
``A 50 percent drop from the peak means you have to wait until the index rises by 100 percent to get the same amount back. Investors still have a long way to go,'' a fund analyst said.