In the first half of 2016, the top-three performing equity fund sectors are gold and precious metals (89.5%), commodity (41.8%) and Latin America (26.8%), according to FE Analytics.
The worst performing sectors are China equities (-11.6%), financial stocks (-10.9%) and UK equities (-10.2%).
The data covers the first half of 2016 and applies to funds available for sale in Asia.
The performance is quite a reversal from the same period last year. In the first half of 2015, the top perfroming sector was China equities with an 18.2% return, according to FE data. UK equities had a 5.8% return.
Among the bottom 10 sectors were gold and precious metals equities (-6.4%) and Latin American equities (-9.4%).
Top sectors link to risk
Funds have been attracted to gold as the asset class is viewed as a safe-haven when political factors such as the Brexit vote weigh on global markets, said Luke Ng, senior vice president at FE Analytics.
“For equities in Asia, we are expecting funds to flow more into gold and precious metals, as these sectors are seen as having less risk following the sharp fall in sterling, while a dovish stance from the Fed is lending support to the gold prices,” Ng told FSA.
This is also valid for the commodity sectors, given the stronger prices of oil and coal following their sharp fall in 2015, he said.
For Latin America equities, Ng believes that since a large portion of this sector is linked to commodity-related investments, the improved trading sentiment in commodities has lent support to this segment.
“We are expecting the overall trend to remain in the third quarter for these top-performing sectors, as investors tend to shift to gold and commodities to minimise investment risks,” he said.
Risk and oil prices have pushed up the first half's best performing sectors, which sat solidly on the bottom during the same period last year.
At the bottom
Ng said China equities were hit hard by concerns over the slowdown in the economy and over further devaluation of the Chinese RMB.
For the UK, it is mainly about the uncertainty over Brexit, he added. “UK equities are expected to see further downside in the near term following the sharp fall in the sterling and continued political uncertainty.”
The financial sector is viewed as having high risks, especially in Hong Kong, and it was the worst performing during the first half, he added.
“The big financial names in the Hong Kong equity markets, such as Standard Chartered and HSBC are London-based, so they are hampered by the Brexit uncertainties. Also, investors are concerned about the major Hong Kong-listed Chinese banks, which have an unknown amount of bad loans on their books. The situation could worsen as the economy slows. I think the financial sector will continue to underperform in the second half.”
The bottom three fund sectors. During the same period last year, the top performing sector was China equities.