HONG KONG: Global economy continues to weigh on Investor Confidence

Jan 17, 2012

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Hong Kong, 17 January 2012: J.P. Morgan Asset Management (JPMAM) today announced the results of its 22nd 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 a further decline in Hong Kong investor confidence from the September level of 110 to 105 in December 2011. This is just above the neutral level of 100, confirming investors" ongoing concerns about the local and especially the global economic environment.

The JPMICI has now been falling for four consecutive quarters, with all individual Index components decreasing again in comparison to their September levels. The Global Economic Environment Index remains the only Sub-Index to show a negative outlook, which fell from 94 in September to 89 in December. Investors continue to show relatively higher confidence in the local economic environment despite a slight drop in the Hong Kong Economic Environment Sub-Index from 107 in September to 106 in December. Other than that, the Hang Seng Sub-Index is at 117, (down 6 points from 123), the Hong Kong Investment Environment & Atmosphere Sub-Index is 104, (down 8 points from 112), the Appreciation of Investment Portfolio Sub-Index is at 109, (down 4 points from 113) and the Increase in Investment Sub-Index is 105, (down 6 points from 111).

Mr. Eddy Wong, Head of Intermediary Distribution, commented, ‘The latest Index findings continue to reflect investors’ concerns with the global economy. In particular, the ongoing European debt crisis has impacted the investment strategies of 53% of the respondents, up from 37% in the previous quarter. At the same time, global inflation is cited by 44% of respondents as affecting their investment strategy, with another 42% saying that the stagnant US economy has had an impact on their investment strategy."

"As these global issues appear set to continue in 2012, the European debt crisis is the top concern to the majority of investors. 80% of investors see the European debt crisis as the biggest risk in 2012, followed by global inflation (64%) and rising commodity prices (64%)."

"A positive local outlook is also observed. The Better Employment Opportunity Index rose from 99 in September to 107 in December. In addition, 42% of investors now see property prices staying at more or less the same level over the next six months and 31% of investors also expect their income to increase over the next six months."

"Given this and the wider global picture, it is not surprising that 71% of investors prefer to invest in Hong Kong over the next six months. 70% of respondents expect the Hang Seng Index to trade between 18,001 and 22,000 by the end of June 2012. However, ongoing investor concerns of market uncertainty can be seen in the almost equal split of respondents considering that the stock market will fluctuate (48%), versus those who believe it will still be a bear market (45%). Such concerns led to 24% of respondents holding a negative stock market outlook, seeing the Hang Seng Index trading below 18,000 by the end of June this year."

"In addition, 87% of investors see China as the market with the highest potential for growth, followed by India (61%). Europe is perceived by 80% of investors as the market with the highest risk in 2012, followed by Japan (71%)."

Ms. Grace Tam, Market Strategist, added, 'Investors' biggest macro fear for 2012 is that the looming recession in Europe proves fiercer than current projections suggest, accompanied by an international credit crunch that consequently drags the US and developing economies into a renewed global recession. Nevertheless, much will depend on further central bank easing and whether politicians in both Europe and the US can finally display decisive leadership. The European debt crisis, despite remaining a key market risk, is nearing the tipping point. As economic data from the US continues to surprise to the upside, we believe the US is likely to avoid a double-dip recession."

"On the other hand, Asia's fundamentals look very good by contrast to the developed world. The brightest prospects in Asia will remain predominantly domestic. In our view, China is heading to a soft landing as it continues to relax selective administrative controls while keeping its eye firmly on containing property prices. The monetary environment will continue to loosen."

"Over a 12-month time horizon, we are slightly overweight equities and looking for opportunities to selectively increase equity exposure. We continue to favour income strategies given the volatile market conditions, and search for yield in a low growth and low rates environment. Equity dividend yields are now looking very attractive, so are high-yield bonds and emerging markets debt."

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 December 2011.

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
Email: daniel.wc.chui@jpmorgan.com

Harriet Ngan, Internal & Media Communications
Telephone: (852) 2800 2776
Email: harriet.hy.ngan@jpmorgan.com
Issued by JPMorgan Funds (Asia) Limited

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. JPMorgan Funds (Asia) Limited Press Release.

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 31 December 2011) 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$75 billion (30 September 2011) 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.

 
 

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