The best performing stock mutual funds in Asia last year are now slumping. Five equity funds yielding 30% in 2021, posting losses of around 6% or more since the start of 2022.
Quoting Bloomberg on Monday (21/2), the mutual fund's declining performance is due to its collection of portfolios in China's renewable energy and electric vehicle sectors. The stock group has been hit after two years of heated protests over Beijing's carbon neutrality goals.
Even after China reaffirmed its policy-easing stance, monetary tightening elsewhere has pushed up global borrowing costs. This led to the release of stocks that had jumped.
There are at least five equity mutual funds that provide investors with at least 30% of the total return last year. All have posted losses of around 6% or more since the start of 2022, according to data compiled by Bloomberg.
The First State Cinda New Energy Industry Equity Fund mutual fund product, has lost up to 11% of managed funds. Meanwhile, the performance of other mutual funds experienced an average loss of 4.7%.
“The mismatch between the green energy spirit and the reality of short-term performance dependence on traditional energy has shown that traditional energy will get better results in the short term,” said Hao Hong, chief strategist at Bocom International.
Asian equity markets fluctuated earlier this year on the prospect of a quick rate hike by the Federal Reserve. This is combined with China's uncertain growth prospects.
The five asset managers declined to comment on their performance.
Meanwhile, equity funds that are good this year are those that focus on the heavy cyclical Japanese market. This is in line with the release of big names to the list of value stocks. Fund managers GLG Japan CoreAlpha Equity and Arcus Japan Fund have a total return of more than 8%.
In the longer term, China's push for net zero carbon emissions by 2060 in what is already the world's largest renewable energy market means the industry has significant room for growth.
But last year's severe energy shortages in China underscore the balance policymakers face between achieving green ambitions and preventing roadblocks along the way.
"We need to see signs of some more stability before investors can turn a little more bullish in the growth sector, so that's going to take some time," said Winnie Chiu, senior equity adviser at Indosuez Wealth Management.
Things may start looking for a new Chinese energy fund later in the year. Because stock valuations are falling and the government is continuing to launch initiatives to meet its climate goals.
The green transition policies announced so far may be less attractive than the market had expected "in terms of timing and strength," said Evan Li, an analyst at HSBC Holdings Plc.
He added that the policy came from the National People's Congress and the National People's Congress. The meeting of the Chinese People's Political Consultative Conference in March could be a catalyst that investment managers and investors should pay attention to.
