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Index shows confidence of Hong Kong investors low

Apr 22, 2008

Hong Kong, 22 April 2008: JF Asset Management (JFAM) today announced the results of its seventh quarterly survey conducted for the JF Investor Confidence Index (JFICI) in Hong Kong. The Index is designed to reflect local investor sentiment towards the Hong Kong market over the next 6 months. The latest findings show that the confidence of Hong Kong investors is at its lowest point since JF introduced the Index in July 2006.

In the latest survey, the JF Investor Confidence Index recorded 117 against a neutral level of 100, a decline of 13 points from 130 in the last quarter of 2007. The March Index clearly shows that the correction in global equity markets since late last year has had a severe negative impact on overall investor confidence in Hong Kong.

Mr Terry Pan, Head of Retail Business said, “The Index reflects a sharp downturn of investor sentiment towards the stock markets and the global economic environment. The financial market volatility triggered by the sub-prime crises and the credit crunch has lasted now for two consecutive quarters and Hong Kong investors cannot be immune to that, no matter how robust their local economy. In addition, the macro-economic tightening measures in the Mainland have also weakened local investor confidence. On a more positive note, although investors are feeling much less positive towards the local and global markets, the survey tells us that 53% of survey respondents expect the Hang Seng Index (HSI) to be at 25,000 points or higher at the end of 2008.”

“As the Hong Kong stock market tends to be highly sensitive to global market movements, we anticipate that the local market will continue to see ups and downs for some time to come. However, Hong Kong’s economic fundamentals remain sound and robust.” said Mr Pan while sharing his views on the Hong Kong market. “Hong Kong investors are also facing the impact of inflation rising as 70% of the respondents will use investments as a way to offset their asset wealth from being gradually eroded by higher inflation. Of those who will invest against inflation, 70% will invest in stocks, 32% in mutual funds, 30% in currencies and 15% in real estate. Given the current market situation, investors should consider a diversified portfolio when they invest in stocks and mutual funds to reduce the investment risks.”

The JF Investor Confidence Index score is derived from asking survey respondents six questions to clarify the confidence of investors about (Q1) the Hang Seng Index, (Q2) HK economic environment, (Q3) HK investment environment and sentiment, (Q4) global economic environment, (Q5) the possibility of personal asset appreciation, and (Q6) the possibility of increasing their investment.  These 6 questions form the sub-indices of the JF Investor Confidence Index. The Index and all subindices have a range between 0 and 200. A number greater than 100 represents a positive outlook and vice versa.

43% of survey respondents this quarter indicated a preference for aggressive investment strategies, which is lower than 52% observed in the previous quarter. In terms of their market preference, 71% of aggressive investors and 70% of conservative investors will concentrate their investments in Hong Kong. Compared to 80% found in the previous quarter, the conservative investors have become hesitant to invest in Hong Kong. Nevertheless, they continue to show a possibility of over-exposure to a single market.

Mr Geoff Lewis, Head of Investment Services added, “It is understandable that the US economic downturn and China’s incremental monetary measures have undermined the previously optimistic attitudes of SAR investors. However, US interest rate cuts, the weakening USD and tax cuts should all start to see their impact in the latter part of this year. The US and Hong Kong equity markets should be able to first stabilise and then regain traction. Before that point, investors may consider investing in markets that are less tied to the performance of the US economy, such as the emerging markets or those which are less risky, such as a diversified bond or capital preservation bond fund.”

The survey also shows that 36% of survey respondents have invested in overseas markets over the past 6 months. In terms of market preferences, Mainland China (79% for Mar 08 vs. 83% for Dec 07), Asia (27% for Mar 08 vs. 24% Dec 07) and Emerging Markets (25% for Mar 08 vs. 16% for Dec 07) were their preferred overseas markets.

Cimigo, an independent market research company, was commissioned to conduct the survey on behalf of JF Asset Management. The survey was developed by interviewing a random sampling of 500 retail investors (N = 500) aged between 21 and 60 who have liquid assets in excess of HKD100,000. The survey was completed in early April 2008.

JPMorgan Asset Management has been monitoring retail investor sentiment closely within the major markets of Europe for some time by conducting an Investor Confidence Survey. This first began in London in the early 1990’s with the publication of a UK Investor Confidence Index. In Asia, a similar Investor Confidence Index has been launched by the firm in Japan and Taiwan and has been well received by local investors.

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For further information please contact
Daniel Chui, Head of Investor Communications
Telephone: (852) 2800 2874
Email: daniel.wc.chui@jfam.com
Issued by JF Asset Management Limited

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Notes to Editors
JF Asset Management (“JFAM”) forms a key part of JPMorgan Asset Management Holdings Inc. and is the descriptive name used for our asset management businesses in Asia ex-Japan. The brand name “JPMorgan Asset Management” covers the asset management activities of JPMorgan Chase & Co. globally.

JPMorgan Asset Management is part of J.P. Morgan Chase & Co. and is a global asset management leader providing world-class investment solutions to clients. With US$1.2 trillion in assets under management (the Asset Management client funds of JPMorgan Chase & Co. as at 31 March 2008) and offices in 40 locations around the world, JPMorgan Asset Management offers global coverage with a strong local market presence, and leadership
positions in most asset classes.

Commitment to Hong Kong
JFAM’s fund management business has remained headquartered in Hong Kong throughout the past three decades and today has more than 450 employees based in this location. Since its formation, JFAM has established itself as one of the largest local portfolio managers in Hong Kong with over US$65 billion (31 March 2008) of funds managed locally.

As part of a major global investment group, we are committed to providing specialist teams with the resources needed to deliver successful products and performance to our clients. The Hong Kong-based Pacific Regional Group, together with the local presence of the Global Portfolios Group, forms the core of JFAM’s investment management operations. In addition to the knowledge and experience of our individual investment professionals, the stability of the team has enabled JFAM to develop strong relationships with local clients.