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JF Investor Confidence Index Shows Investors Remaining Optimistic Amidst Economic Risks

Jan 10, 2008

Hong Kong, 10 January 2008: JF Asset Management (JFAM) today announced the results of its sixth 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 still high despite the looming global economic risks in 2008.

In the latest survey, the JF Investor Confidence Index recorded 130 against a neutral level of 100, a slight decline of 4 points from 134 in the third quarter of 2007. The December Index shows that the correction in global equity markets in the last quarter of 2007 had only a limited impact on overall investor confidence in Hong Kong.

Mr Edwin Chan, Head of Institutional & Pension Business said, “The Index shows that investors in Hong Kong have only been affected to a limited extent by the uncertainties pervading global equity, credit and structured product markets. So far, the growing threat of US recession, the continuing stresses and strains in international credit markets and tightened macroeconomic policies in China caused investor confidence in the SAR to fall back, but only to absolute levels that remain very high. Local investors remain optimistic over the mid to long term as they continue to see a positive prospect of increasing incomes, better employment opportunities and higher residential property prices. This survey also tells us that 89% of survey respondents expect the Hang Seng Index (HSI) will reach 25,000 points or above at the end of 2008, of which over 48% even expect the HSI to trade between 30,000 and 40,000 by the end of the year.”

“We expect the Hong Kong stock market continue to be volatile but we remain confident in the overall economic prospects. We believe that mainland China’s tightening measures are about slowing economic growth to sustainable levels, not about engineering a sharp slowdown in the macro-economy or rapid deflation of asset prices.” said Mr Chan while sharing his views on the Hong Kong market. “Hong Kong’s macro-economy should remain healthy and asset prices should respond as Hong Kong interest rates are linked to the U.S. via the territory’s fixed currency board.”

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.

52% of the investors polled this quarter intend to take an aggressive stance over the next six months, which is higher than the 46% in the last survey. In terms of market preference, 72% of aggressive investors and 80% of conservative investors prefer to concentrate their equity investments in Hong Kong, similar to the results observed in the previous quarter. The similarity between conservative and aggressive investors with regard to market preference and investment approach again highlights the possibility of over-exposure to a single stock market among the conservative investors.

Mr Geoff Lewis, Head of Investment Services added, “Markets in late 2007 rode a sea of uncertainties that led to a more volatile than usual December, traditionally a strong month for stocks. Investors struggled mentally to gauge whether staying invested into 2008 was too risky. They thus held back, ensuring that no year-end rally took place. Things simply looked too close to call. But we think 2007’s heritage of unanswered issues will be clarified as 2008 progresses. Patient global investors should eventually benefit from a further leg to the secular rally in equities later in the year. All regions are likely to participate in this and so stock selection will prove key to outperformance. Stay the course!”

The survey also indicates that 33% of survey respondents had invested in overseas markets over the past 6 months. In terms of their market preferences, Mainland China (83% for Dec 07 vs. 81% for Sept 07), Europe (33% for Dec 07 vs. 32% for Sept 07) and Asia (24% for Dec 07 vs. 17% for Sept 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 December 2007.

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 30 September 2007) 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$44 billion (30 September 2007) 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.