J.P. Morgan Investor Confidence Index stable yet cautious

Jan 19, 2011

Results announced for the quarterly survey conducted for the J.P. Morgan Investor Confidence Index in Hong Kong.

Hong Kong, 19 January 2011:  J.P. Morgan Asset Management (JPMAM) today announced the results of its eighteenth 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 six months.  The latest findings show that the confidence of Hong Kong investors has risen further from the September level, with the Index increasing from 124 in the last quarter to 126.  The Index suggested a further stabilization of investment sentiment for the next six months.

In particular, the increase in the Index is supported by a stronger belief in the appreciation of the investment portfolio’s value.  The corresponding index component recorded a 6-point increase from 125 in 3Q'10 to 131 in 4Q'10.  A positive outlook towards the Hong Kong economy and investment environment was also captured in the recent survey.  The confidence index components referencing a better Hong Kong economic environment and investment environment & atmosphere are both at 125, up 1 point and 2 points respectively.  While a positive mood towards the local economy is reflected, Hong Kong investors are still looking for more convincing evidence to determine whether the global economy has entered a real and sustainable recovery as the global economic environment sub-index remains unchanged.

Mr. Eddy Wong, Head of Intermediary Distribution, said, “Hong Kong investors are optimistic towards the economic outlook in the coming six months.  More investors expect an increase in income (JPM sub-index 117, up 11 points) and better employment opportunities (JPM sub-index 118, up 9 points).  The majority of respondents (49%) are local investors who believe the Hong Kong economy has become stable, but with an unclear outlook.  Investors also expect to see the stock market continue to improve and 92% identified stocks as one of the investment products of interest in the next six months.  A bullish expectation towards the Hang Seng Index is also observed: 78% of Hong Kong investors think that the Hang Seng Index will likely trade between 22,001 and 26,000 at the end of June 2011, while 61% think it may surpass 24,000.”

“Nearly 53% of investors thought inflation to be one of the factors contributing to the unclear outlook and 30% (increased by 10% from last quarter) consider it to be the greatest risk to the Hong Kong economy in 2011.  Commodity prices continue to be expected to move higher (JPM sub-index 169), as the index is at its highest point since 2Q 2008.  Grocery food items are the main driver to the increase in price expectation. 16% of investors believe that inflation and interest rate hikes would affect local investments.  The recent property cooling measures put in place by the Hong Kong government have yet to make an impact on investors: 80% said it has no impact on their investment strategies. 34% of investors still think that the threat of a burst in the property bubble represents the greatest risk in 2011, showing a 7% increase from the last quarter.”

“54% of surveyed respondents this quarter indicated a preference towards aggressive investment strategies, slightly higher than the 50% observed last quarter.  71% of Hong Kong investors continue to see mainland China as the market with the highest potential for growth, far ahead of other markets in Asia.  34% (an increase of 10% from last quarter) of investors believe Europe and the US to be the markets with the highest risks in 2011, which is 6% higher than those expecting the same for Asia regions.”

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 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 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.

Ms. Grace Tam, Vice President of Investment Services, added, “Asian economic growth will continue to be stronger than OECD growth but correlated with it.  Inflation will be one of the key risks in 2011. The basic ingredients of growth – infrastructure build-out and rising consumer appetites – will strengthen the intra-regional growth story as demands for raw materials sourced in the southern part of the region are consumed by the two economic power houses – China and India.”

“The easy monetary policy in the West, accompanied with quantitative easing, remain catalysts for an asset bubble in Asia.  Hence, the macro story is likely to yield to far greater stock level scrutiny in 2011 governed more by earnings and valuations.”

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 sample of 507 retail investors (N = 507) 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 completed at the end of December 2010.

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 and India 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

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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.

J.P. Morgan Asset Management is a global asset management leader providing world-class investment solutions to clients. With almost US$1.3 trillion in assets under management (the Asset Management client funds of J.P. Morgan Chase & Co. as at 31 December 2010) 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$96 billion (31 December 2010) 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, 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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