HONG KONG: J.P. Morgan Investor Confidence Index shows increased optimism but uncertainty still impacting confidence.
Oct 15, 2012
Hong Kong, 15 October 2012: J.P. Morgan Asset Management (JPMAM) today announced the results of its 25th quarterly survey conducted for the J.P. Morgan Investor Confidence Index (JPMICI) in Hong Kong. Designed to reflect local investor sentiment towards the Hong Kong market over the next 6 months, the latest results show that confidence is returning with an increase from the June level of 103 to 109 in September 2012. This improvement is mainly driven by increased optimism in the local economic environment as well as the global economic situation, despite ongoing uncertainty.
All sub-indices show relatively strong improvement from last quarter with the Hang Seng Sub-Index rising from 114 to 123 (up 9 points), and both the Hong Kong Investment Environment & Atmosphere and Hong Kong Economic Environment Sub-Indices up 4 points to 109 and 108, respectively. Increased optimism is also noted in the Value of Investment Portfolio Sub-Index which have moved up from 105 in June to 111 in September. The Global Economic Environment Sub-Index shows one of the largest gains (up 8 points), but still sits in negative territory at 97, just below the neutral level of 100.
Ms Catherine Mow, Head of J.P. Morgan Investment Centre, said "Investor confidence has been fluctuating over the last 12 months, reflecting ongoing uncertainty both locally and particularly, in global markets. The latest findings show an uptick in local confidence, seen not only in the sub-index results, but also in the outlook for employment opportunities. 48% of investors expect the Hang Seng Index to trade above 20,000 points in the next six months – compared to just 15% last quarter. Also, one third of investors see their income levels increasing over the next 6 months."
This local optimism is, however, tempered with concerns of both commodity and property prices hitting higher levels. The Hong Kong property bubble bursting is viewed as the biggest risk to the local economy (cited by 74% of respondents) while rising commodity prices were cited by 64% as another key risk. In addition, half of the respondents expect rising prices to be driven by rent increases.
"At the global level, the introduction of QE3 by the U.S. Federal Reserve and the Outright Monetary Transactions (OMT) program by the European Central Bank has helped improve investor sentiment towards the global economic environment. Nevertheless, investors remain concerned about the European debt crisis as it is seen as the second biggest risk this year (cited by 66%). Europe is still clearly perceived as the market with the highest risk (cited by 84%), followed by the U.S. and Japan (73% and 65% respectively). 38% of investors think the ongoing European debt crisis is impacting on their investment strategy."
"Given the ongoing uncertainty it is no surprise that investors continue to be conservative in regard to their investment planning. 30% of respondents identify capital growth as their investment objective for the next 6 months, followed by income (26%), capital preservation (21%) and aiming for a return that exceeds inflation (20%)."
Speaking about the Greater China market outlook, Mr Emerson Yip, Investment Manager with the Greater China Team, noted that, "Chinese equities will likely remain volatile in the near term due to the overhang of Eurozone debt issues and earnings downgrades. Weak external demand coupled with sluggish domestic investment suggests a weak recovery, if any, in China's Q3 GDP growth unless the pace of policy easing accelerates in the coming weeks. Nonetheless, we see plenty of opportunities in Chinese equities both from valuation and fundamental perspectives."
"While China's delayed policy response is increasingly being priced in by the market, we believe the Chinese government is taking its time on a policy response given the hangover from a too-large 2009 stimulus and the lack of alarming data on unemployment, bank asset quality or social unrest.
"We continue to look for secular growth opportunities in Hong Kong and China at attractive valuations. While we believe the recent property measures introduced by the Hong Kong government so far should not have a meaningfully adverse impact, the market remains concerned over potential new measures. We believe this situation creates buying opportunities for specific names."
"In Taiwan, the technology sector generated the most buying interest, driven by a bottoming of earnings revisions and expectations of good momentum in 4Q2012. With the launch of new products in the mobile space, related suppliers should remain in the spotlight. At the same time, component suppliers to China's low priced smartphone players should benefit as the market is growing rapidly."
"All in all, we see plenty of opportunities in Greater China equities both from valuation and fundamental perspectives. We have added to our positions in Taiwan's domestically-focused stocks as well as Chinese internet firms. Given the current compelling valuations in Chinese stocks, we will focus on bottom-up stock selection in Hong Kong and China markets."
The J.P. Morgan 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 atmosphere, (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 J.P. Morgan Investor Confidence Index. The Index and all sub-indices have a range between 0 and 200. A number greater than 100 represents a positive outlook and vice versa.
Cimigo, an independent market research company, was commissioned to conduct the survey on behalf of J.P. Morgan Asset Management. The survey was developed by interviewing a random sampling of 506 retail investors (N = 506) aged between 30 and 60 who have at least 5 years of continuous investment experience with liquid assets in excess of HKD100,000. The survey was conducted during September 2012.
J.P. Morgan 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 Taiwan, Korea, India and Singapore, 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
Harriet Ngan, Internal & Media Communications i
Telephone: (852) 2800 2776
Issued by JPMorgan Funds (Asia) Limited
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Notes to Editors
J.P. Morgan Asset Management ("JPMAM") is the brand name of J.P. Morgan Chase & Co's asset management companies, including JPMorgan Funds (Asia) Limited.
J.P. Morgan Asset Management is a global asset management leader providing world-class investment solutions to clients. With over US$1.3 trillion in assets under management (the Asset Management client funds of J.P. Morgan Chase & Co. as at 30 June 2012) and offices in 41 locations around the world, J.P. Morgan Asset Management offers global coverage with a strong local market presence, and leadership positions in most asset classes.
Commitment to Hong Kong
JPMAM's investment management business in Asia has remained headquartered in Hong Kong for more than four decades and today has over 500 employees based in this location. JPMAM is one of the largest local investment managers in Hong Kong with over US$73 billion (30 June 2012) of funds managed across the Asia Pacific region.
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, Global Multi Asset Group and Global Fixed Income Groups, forms the core of JPMAM's investment management operations. In addition to the knowledge and experience of our individual investment professionals, the stability of the team has enabled JPMAM to develop strong relationships with local clients.