Patient investors will get rich returns, says market veteran

With indices dropping to multi-year lows, investors are pulling out of the market. But best value might be found in times of turbulence, according to Joe Mansueto, founder of rating agency Morningstar.

A veteran in the investment world, Mr Mansueto recommends investors to go bullish on equity even if the current crisis is sending everyone running for cover.

September saw one of the largest net redemptions of funds in Hong Kong since Morningstar started tracking the fund flow data in 2000. Net redemptions of investment funds or net outflow, which is total redemptions minus sales, was US$1.81 billion in September, ballooning from August's US$509 million, according to Morningstar. It was the same story around the world. He said he expected similar levels of redemption in October.

Equity funds were hit the most, with a net outflow of US$1.19 billion, 65 per cent of the total. Casualties were found across the board. Whether invested in Asia, North America or emerging markets, all funds had redemptions several times their sales, reflecting the panic of investors.

Last month, tycoon Lee Shau-kee, a long-term investor in Hong Kong and mainland stocks, shocked observers when he sold 31.8 million China Life shares, a stock he had frequently recommended. Even bond funds, once considered a safe haven in difficult times, saw redemptions double sales and a net outflow of US$219.1 million.

'The current crisis is the worst since the mid-1970s,' Mr Mansueto said.

In the 1970s, high oil prices crippled markets around the globe. The Hang Seng Index lost almost 90 per cent of its value from its peak of 1,625 points in February 1973 to 171 points in December 1974. The index did not recover its 1,600 level until 1980.