HSBC remains cautious on the asset management sector, noting that while Systematic Investment Plan (SIP) flows remain steady, lump sum inflows have been weak, impacting overall Assets Under Management (AUM) momentum.
The brokerage estimates implied AUM growth in equity and hybrid funds at around 12%, lower than past cycles. While structural tailwinds such as financialisation of savings and growing retail participation remain intact, the current pace of AUM growth is not strong enough to justify current valuations, in HSBC’s view.
Valuations for top asset management companies are now approaching the peak levels seen during the last growth cycle, increasing downside risk if earnings momentum does not catch up.
Earnings are expected to grow at a slower rate going forward, and HSBC recommends investor caution, even as long-term fundamentals remain positive.
Disclaimer: The views and target prices mentioned are as stated by HSBC and do not represent the opinions or recommendations of this publication. Investors are advised to consult their financial advisors before making any investment decisions.
