J.P. Morgan investor confidence index shows investors increasingly concerned about global economy

Oct 10, 2011

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

Hong Kong, 6 October 2011: J.P. Morgan Asset Management (JPMAM) today announced the results of its 21st 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 findings show that the confidence of Hong Kong investors fell significantly from 118 in June to 110 in September. Although still being above the neutral level of 100, the Index reflects investors growing concerns towards local as well as global economic conditions.

The JPMICI has been dropping steadily from the March 2011 level of 120 to the current level of 110. All Index components decreased in September compared to the June levels, with the Global Economic Environment Sub-Index falling well below 100 to stand at 94, which indicates a negative outlook for the global economy. However, investors continue to show relatively higher confidence in the local economic environment, despite a 13-point decrease in the Hong Kong Economic Environment Sub-Index (from 120 in June to 107). The Appreciation of Assets Sub-Index dropped from 121 to 113, while the Possibility of Increasing Investments Sub-Index remained roughly at parity (111 in September vs 114 in June).

Mr. Eddy Wong, Head of Intermediary Distribution, said, 'Hong Kong investors are increasingly concerned about the economic outlook in the coming six months, driven mainly by uncertain economic conditions in the global markets. Given the impact of global financial events, 37% of investors indicated that the European debt crisis has affected their investment strategies; 37% cited the U.S. credit rating downgrade; 36% mentioned the rising commodity prices and 31% cited the U.S. Federal Reserve's announcement of low interest rates until 2013 as having affected their investment strategies."

"The biggest risks currently of concern to investors include: a property bubble bursting in Hong Kong (16%), stock market crash in Hong Kong (16%), the European debt crisis (13%), inflation (12%) and rising commodity prices (11%). All these factors are also hurting investor confidence."

"In addition, 26% of investors expect employment opportunities to be 'worse than current, showing a significant increase from the June level of 10%. The majority of investors (80%) also expect commodity prices to be higher and the rest believe commodity prices will be extremely higher, with expected drivers being food (50%), rental (34%) and transportation (11%)."

"Despite the gloomy global outlook, Asian markets still offer the highest potential growth to local investors: 64% of investors believe Mainland China has the highest potential for growth, followed by India (11%). On the other hand, 37% of investors consider Europe to be the market with the highest risk in 4Q2011, followed by the U.S. (25%)."

"In addition, almost three quarters of respondents (72%) expect the Hang Seng Index to trade between 18,001 and 22,000 in the coming 6 months. An increasing number of investors (up from 31% in June to 38% in September) consider Hong Kong stock market to be in a bear market and the majority (57%, unchanged from June) expect market fluctuations will persist. Only 6% of investors consider the Hong Kong stock market to be entering a bull phase (down from 12% in June)."

Ms. Grace Tam, Market Strategist, added, "The European debt crisis and fears of a global recession continue to impact investor confidence. Key economic indicators are suggesting that an economic recession has yet to appear in the U.S. However, Europe looks set for a mild recession in 2012 while the periphery is already mired in a deep one. Weaker growth prospects in the Eurozone and tight monetary conditions are aggravating debt sustainability problems in Spain and Italy."

"On the other hand, in emerging markets, we are seeing attractive valuations in equities. Extreme risk aversion presents a buying opportunity for long-term investors as fundamentals in emerging markets remain strong. Buying opportunities are also emerging for high-yield and emerging market debt."

"As for China, we believe it is heading for a soft landing. We may have already seen the peak of inflation, and falling inflation will allow the Chinese government to ease its monetary stance. It is worth noting that net exports play a smaller role in the Chinese economy, that is often supposed, and aggregate final demand is now mainly driven by investment and domestic consumption. Corporate fundamentals are solid in much of Greater China and we continue to believe that once the global financial problems abate, investors will perceive substantial value in regional equities. We remain optimistic on the domestic consumption investment theme."

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 502 retail investors (N = 502) 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 in late September 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

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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 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$91 billion (30 June 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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