Singapore fund flows healthy in Q2, but gains to slow in rest of 2023: analyst

Economic growth will slow in H2, which may limit the rate of market gains.

Singapore’s fund flows remained healthy in Q2, with the overall performance of funds linked to its Central Provident Fund Investment Scheme (CPFIS) rising by 2.55% during the quarter, according to the latest report from Morningstar.

Although slightly slower than the 3.39% returns in Q1, Morningstar noted that the scheme still netted growth where global bonds–which Morningstar measured through the FTSE WGBI Index–logged negative returns.

Bryan Cheung, Associate Director of Manager Research at Morningstar, remarks: “As CPFIS products provide funding for many Singaporeans’ retirement, healthcare, education, and housing, the quarterly performance monitoring report for all CPFIS-included funds is crucial in offering a timely and comprehensive performance analysis amid today’s economic uncertainties and elevated market volatility.”

Looking ahead, Singapore’s economic growth is expected to slow down sequentially in the third and fourth quarters of 2023. This may limit the rate of market gains, said Bryan Cheung, associate director of manager research at Morningstar.

“Despite the broad market being considered undervalued, the rate of market gains may be limited because of slowing economic growth, tight monetary policy, and reduced credit availability over the next few quarters. Against this backdrop, building resilience into investor portfolios is key to navigate a wide range of possible macro scenarios.” he added.

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By asset class, equity CPF funds registered a 3.4% gain, building on the 4.01% gain in the first quarter. Bond funds also rose by 0.21%, whilst allocation funds were up 1.71%.

Money market funds also rose by 0.89%, according to Morningstar.

Compared to a year ago, all asset classes also notched positive returns. Equity funds led the way with a gain of 4.86%, whilst fixed-income and allocation funds reported average positive returns of 0.13% and 1.73%, respectively. 

Over the same period, money market funds have also performed well, with an average positive return of 3.07%.

However, on a three-year interval, bond funds struggled to perform, with an average negative return of 7.26%. In contrast, equity, allocation, and money market funds had respective cumulative gains of 15.84%, 5.97%, and 3.62%.