Investors Fleeing Bonds, Savings Spur Record Flows Into Gold: India Credit
By Tushar Dhara and Swansy Afonso - Nov 11, 2011
Investors in India are withdrawing from government bonds and national-savings schemes to pour record amounts into gold.
Funds that invest in sovereign debt shrank 4 percent from a month earlier to 30.2 billion rupees ($606 million) in September and those that buy gold rose 8 percent to an all-time high of 81.73 billion rupees, according to the Association of Mutual Funds in India that is also known as AMFI. Individual investors withdrew 78.7 billion rupees between April and September from small-savings deposit plans such as those run by post offices, the most since at least 2000, government data show.
Benchmark bond yields in Asia’s third-biggest economy are headed for the biggest annual increase since 2009 as investors seek shelter from inflation that has held above 9 percent since December. The yield on the nation’s 10-year notes is 76 basis points below the rate of inflation, compared with 14 basis points in South Korea. Indonesia’s bonds yield 179 basis points more than the rate of consumer-price increases.
“There is asset-switching, and people are betting more on gold as it is a safer asset and offers a hedge against India’s high inflation and the economic uncertainty affecting the world,” Debasish Mallick, the Mumbai-based chief executive officer at IDBI Asset Management Ltd. that oversees about $1 billion, said in an interview on Nov. 9. “Investing in gold is a very prudent asset-allocation strategy.”
IDBI Asset’s first gold mutual fund, which collected 1.1 billion rupees from 12,000 individual investors, will start trading on Nov. 17.
bloomberg.com |
