Mutual funds decline on low investor confidence

After the stock market declined in recent months, investor confidence has gradually declined, even among long-term mutual fund investors. The total fund size of the mutual fund industry decreased by nearly NT$100 billion last month, according to the Association of Securities Investment Trust and Advisory Company (投信投顧公會).

Analysts said the significant redemption from stock funds last month means that investors have lost confidence in the long-term prospects of the local stock market. Investors did not put their money back into local bond funds last month.

According to the Association, the total amount of all stock and bond funds was NT$1.26 trillion at the end of September. That is NT$96.6 billion less than the previous month, and the largest decrease in the last two years.

Since Taiwan's stock market declined rapidly last month, investors have redeemed their investments from the local mutual fund industry on a massive scale, said executives of the association. The largest decrease came from stock funds raised in foreign markets and invested in Taiwan's stock market, with a nearly 20 percent decrease in its fund size last month. The total amount of these foreign funds was NT$25.05 billion at the end of last month, a decrease of 19.86 percent from the previous month.

The largest decrease in the fund size last month was in open-end stock funds, decreasing NT$52.2 billion, or 17.49 percent, to NT$240.62 billion at the end of September.

The amount of close-end stock funds also decreased 18.65 percent to NT$23.91 billion at the end of last month.

The largest increase came from balanced funds -- invested in both stocks and bonds, which increased 17.92 percent to NT$43.3 billion.

Analysts said investors bought more balanced funds last month to decrease their investment risks in the stock market.

The amount of local bond funds also decreased 3.35 percent to NT$832 billion, which was the largest sector in the local fund industry.

The amount of foreign bond funds, which was raised in local markets and invested in foreign bonds, increased by 12.83 percent to NT$67.1 billion last month.