J.P. Morgan Investor Confidence Index starts picking up
Oct 20, 2010
Results announced for the quarterly survey conducted for the J.P. Morgan Investor Confidence Index in Hong Kong.
Hong Kong, 20 October 2010: J.P. Morgan Asset Management (JPMAM) today announced the results of its seventeenth 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 Index recorded 124 (against a neutral level of 100) in 3Q’10, up 2 points from the last quarter. This represents sustained Hong Kong investor confidence and a positive undertone following the September market rally.
Two key factors contributed to the increase in the Index: the global economic environment and sentiment towards investments. The confidence index component referencing a better global economic environment surged in a quarter to 117 in 3Q’10, compared with 112 in 2Q’10. During the latest survey period, only 10% of those surveyed saw the weak external environment / economic situation as risks vs. 16% in 2Q’10. Investors also found more opportunities to invest in the last quarter, with sub-indices such as the amount of investments (up 2 points), Hang Seng Index (up 2 points), and value of investment portfolio (up 1 point) edging up against the previous quarter.
Mr. Eddy Wong, Head of Intermediary Distribution, said, “Apparently, there is a positive outlook among local investors. About 66% think the Hang Seng Index will reach a range of 22,000 – 26,000 by March 2011, with 23% expecting the Index to reach 24,000 or more. Another positive signal is that 13% of investors believe that the current Hong Kong stock market is bullish, a gain of 5% from the last quarter, though 66% of investors continue to believe that the current stock market is wavering between bull and bear.”
“Still, there is uncertainty in our domestic economy. Although 44% of local investors thought that Hong Kong’s economic outlook is unclear, down from 52% last quarter, sentiment towards Hong Kong’s economic environment (JPM Index 124) and the investment atmosphere (JPM Index 123) remained steady, though they have yet to return to the level of 1Q2010. Over the past 12 months, confidence in salaries and in the job market showed a consecutive decline, with the latest readings at 106 and 109 respectively.”
“With concerns of a property bubble and inflation becoming a threat, Hong Kong investors will be more vigilant towards further investments. They are anticipating even higher property prices (74%) and commodity prices (85%) in the next 6 months (compared to 66% and 78% respectively last quarter). In Q3’10, 27% ranked a property bubble as the biggest market threat, up 6% from Q2’10, followed by 20% agreeing that inflation is a threat. These risks have led to investors lowering their intention to invest in stocks (80%) and property (9%) in the next 6 months (down from 91% and 13% in the previous quarter).
“In this survey, investors were also asked about the impact of gold appreciation, yen appreciation, and a double-dip recession on their investment strategies. Of those investors whose local investment strategies were affected, 23% quoted the gold price as the key factor. On the other hand, 36% and 34% indicated that yen appreciation and double-dip recession respectively have affected their overseas investment strategies. The majority of investors who plan to change their foreign investment strategies will adjust their fund investments - 51% will increase their fund investments while 43% intend to decrease them.”
“Across the border, the booming Chinese economy and its effective economic stimulus plan have contributed to its dynamic business momentum. About 7 in 10 Hong Kong investors believe Mainland China has the highest potential for growth, which is far ahead of other markets in Asia. Among those who have invested in overseas market, 85% opted for China in the past 6 months, while 20% indicated their intention to invest more in China in the coming 6 months. In particular, the intention to invest in RMB bonds increased further to 19% (vs. 15% in 3Q’10 and 12% in 2Q’10).”
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.
Mr. Emerson Yip, Investment Manager of the Greater China Team, added, “The major theme of China’s economy at the moment is re-balancing and re-positioning for ‘higher-quality’ growth. We are seeing China heading for longer-term re-balancing towards domestic demand, aided by accelerating urbanization, favourable demographics, regional development plans to accelerate industry upgrading, as well as government policies in favour of consumption growth. While the growth story remains intact, we are expecting a moderation in overall GDP growth but a ‘higher- quality’, more sustainable and profitable pace of growth.”
“Benefiting from continued supportive monetary conditions and sustained China growth, Hong Kong continues to see strong asset inflation and a robust domestic recovery. With respect to Taiwan, improving cross-strait relations is driving interest in domestic names. Against the backdrop of an uncertain global economic environment, the market is vulnerable to external shocks as well as to policy risks and cost inflation in China. The current level of valuations is reflective of the tension between the assumption of further quantitative easing amidst an uncertain global economic recovery.”
“Nonetheless, we are seeing attractive investment opportunities in smaller companies in the Greater China markets. Small-mid caps often offer higher exposure to key sub-sectors within the region’s key investment theme of domestic consumption that are generally uncovered. Smaller companies with high growth potential present good risk-reward opportunities and offer the potential for higher performance over large caps over a long timeframe.”
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 505 retail investors (N = 505) 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 September 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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Issued by JPMorgan Funds (Asia) Limited
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Notes to Editors:
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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 September 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 about 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$90 billion (30 September 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.