HONG KONG: J.P. Morgan Investor Confidence Index - local & global economic uncertainty dents investor confidence
Jul 16, 2012
Hong Kong, 16 July 2012: J.P. Morgan Asset Management (JPMAM) today announced the results of its 24th quarterly survey conducted for the J.P. Morgan Investor Confidence Index (JPMICI) in Hong Kong. The Index is designed to reflect local investor sentiment towards the Hong Kong market over the next 6 months. The latest quarterly results show that investor confidence has fallen from the March level of 118 to 103 in June 2012. This is just above the neutral level of 100, reflecting investors’ heightened concerns with both the local and global economic environment.
The increase in confidence enjoyed last quarter (from an Index of 105 in December 2011 to 118 in March 2012) has not been maintained at any sub-indices level. The greatest decline is in the Global Economic Environment Sub-Index – from 110 in March to a negative outlook of 89 in June. The Increase in the Investment Sub-Index sits at 102, (down from 111 last quarter), the Hong Kong Economic Environment Sub-Index is at 104, (down from 117) and both the Appreciation of Investment Portfolio and Hong Kong Investment Environment & Atmosphere Sub-Indices are at 105, having fallen from 122 and 119, respectively. The Hang Seng Sub-Index has fallen from 131 to 114 this quarter and now represents the lowest achieved rating for this metric in the past two years.
Ms Catherine Mow, Head of J.P. Morgan Investment Centre, commented, “The latest findings reflect the ongoing uncertainty and concerns in both the local and, especially, the wider global markets. With the Greek election in mid-June being too close to call, 51% of polled investors cited a possible Euro collapse with Greece leaving the Euro, and 44% mentioned the ongoing European debt crisis as key factors impacting their investment strategies. The European debt crisis continues to be seen as the biggest ongoing risk in 2012, (cited by 70% of respondents) and Europe is still clearly perceived as the market with the highest risk in 2012 (cited by 84%). Global inflation is another continuing key concern, and is mentioned by 57% of investors.”
Closer to home, confidence is still influenced by worries over the Hong Kong property and stock market bubbles bursting (67% and 66%, respectively, name these as the biggest risks for the remainder of 2012), with nearly as many (61%) concerned over rising commodity prices (food and rent being the main drivers). A potential slowdown in both Hong Kong and Mainland China growth has also impacted one third of investors’ investment strategies.
“This softening in optimism compared to last quarter’s improvement is further reflected in their outlook on the Hong Kong stock market. Over half of the investors polled (56%) foresee a fluctuating bull and bear Hang Seng Index, while 83% of respondents expect the Hang Seng Index to trade below 20,000 at the end of 2012.”
“With this ongoing uncertainty, investors are more cautious and conservative with respect to their investment allocation. Nearly one in five (18%) are overweighting cash in their investment portfolios in the next six months. Amongst those who would overweight or stay neutral on their fixed income investment, 83% prefer government bonds, followed by 40% in Asian bonds and 35% in high yield corporate bonds.”
Speaking about the global market outlook, Grace Tam, Market Strategist of JPMAM, noted that “The key risks that have dominated global markets so far in 2012 will continue to make investors anxious. A muddle-through scenario in the Eurozone is very likely, with ongoing implementation of austerity packages in peripherals and ad-hoc support from the European Central Bank for virtuous countries. In the US, recent economic data has been disappointing but we expect to see a slight pickup in growth towards the second half of the year with GDP growth at around 2% - 2.5% for 2012. Having said that, a slow growth environment could be a valuable opportunity for high-yield bonds due to their consistent attractive coupon payments, accompanied with lower volatility relative to equities and low default rates.”
“In terms of asset allocation for our global balanced portfolios, we are now tactically overweight stocks over bonds in expectation of a short-term rebound in markets as markets have corrected substantially, risk appetite is below average and equities look mildly oversold.”
In Asia, declining demand and competition from Europe have weighed on Asian exports. Nevertheless, Asian valuations look attractive at the moment. With falling energy and commodity prices, Asia may see the start of a turnaround in margin performance later this year.
“As for China, we expect more easing measures over the next couple of months, if not weeks, including Required Reserve Ratio (RRR) cuts, liquidity injection in open market operations, further interest rates cuts or even loosening of the loan-to-deposit ratio for commercial banks. On the fiscal front, further tax cuts and more spending on social welfare and infrastructure are very likely. We expect economic activity in China to revive more significantly in 2H2012 as the easing measures are starting to filter through into the broader economy. Therefore, China could still be able to achieve GDP growth of 8% for the whole year, in our view.”
“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 512 retail investors (N = 512) 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 June 2012.
J.P. Morgan Asset Management launched the first Investor Confidence Survey 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.
For further information please contact
Daniel Chui, Head of Investor Communications Harriet Ngan, Internal & Media Communications
Telephone: (852) 2800 2874 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 three decades and today has over 500 employees based in this location. JPMAM and its investment arm - JF Asset Management - are one of the largest local investment managers in Hong Kong with over US$77 billion (31 March 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.