Asian investor sentiment fell sharply in the third quarter, with the most noticeable declines seen in Japan and Indonesia and the deepest pessimism in Hong Kong and Taiwan, driven largely by deteriorating expectations towards the equities and property sectors.
The survey index on the investor sentiment dropped six points from the previous quarter to 15. This was still in positive territory but well below that seen in a parallel index in United States (20) which fell by the same amount during the quarter. The index showed sentiment towards all surveyed asset classes to be at best lukewarm. Investor sentiment was lowest in Hong Kong (-14) for the second quarter running, while investors in Malaysia were the most upbeat (49).
“These findings underline the caution felt by investors around the region. People are sitting on their hands, unsure what to do,” said Robert A. Cook, President and CEO of Manulife Financial in Asia. “The survey is clear that Asia investors aren’t looking for excitement. They want secure, steady investment returns. From their perspective, that makes a lot of sense, particularly when saving for long-term goals.”
Stock market volatility deters investors — but stocks still popular
Investors across the region cited market volatility as the main reason for having less appetite for stocks. The prospect of a tapering of quantitative easing in the U.S. also fuelled concerns. However, the increasingly negative sentiment towards stocks was not mirrored in actual investment holdings and, when asked which asset classes they would choose if they were to make further investments, stocks remained the most popular choice.
Sentiment towards property also fell in most markets, in part reflecting government interventions to cool prices or increase supply. Sentiment fell sharply in Indonesia, Japan and Taiwan. The most pessimistic investors on property, though, were in Hong Kong. In this market, overall sentiment started negative in the first quarter this year and has continued to decline since, as more than two thirds of investors there believe current prices are too high and that a correction is likely.
Analysts note that the sentiment on equities has yet to recover in much of Asia, but valuations are still attractive in many markets, with optimism on the mid- to long-term outlook. It is well noted that quantitative easing tapering is inevitable, but the Fed has indicated that interest rates will remain low to support further growth. Meanwhile, mainland China, Taiwan and Korea all posted positive Flash PMI readings for August and September. In addition, governments in the region are taking steps to tackle issues such as current account imbalances and inflation.
Investors hoard cash, risking poor returns
Cash remains king in the region, with an average of 22 months’ personal income held as cash, rising to 35 months in mainland China and 39 months in Singapore. Cash makes up an average 40 percent of investors’ assets, a reflection of the value investors place on safety, stability and liquidity when it comes to their wealth.
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