SINGAPORE: J.P. Morgan Investor Confidence Index hits new low as Singapore retail investors turn cautious
Feb 07, 2012
- Survey shows 75% of respondents plan to maintain or increase investments despite pessimism
- Investors up holdings of deposits, mutual funds and insurance
- Nearly 80% of respondents are fairly risk-cautious or seek capital preservation
Singapore, 7 February 2012 – Singapore retail investors are becoming more pessimistic in their investment outlook compared with six months ago, according to a poll released today to by J.P Morgan Asset Management.
Those who were upbeat or neutral when the same survey was conducted six months earlier have mostly turned cautious about the future. In particular, they were most bearish about the economic and market outlook in Singapore and around the world.
Consequently, the J.P. Morgan Investor Confidence Index now stands at 86, the lowest since its launch a year ago, down from 121 in July 2011 and 134 in December 2010. The online polls are conducted every six months and are part of a series of regional polls by the fund management arm of J. P. Morgan in Asia.
Although nearly 80% of the respondents described themselves as being "fairly cautious" or looking for "capital preservation," a significant number of them are not selling down their portfolios. Some 75% of the 502 people polled indicated that they are still either planning to maintain or increase their current investment amount in the next six months.
Asked how they expect their investment strategy to change in the next six months, 35% planned to be a bit or a lot more conservative, up from 18% six months ago. Those who planned not to change their strategy comprised 36% of the respondents, down from 47%. Despite the prevailing bearishness, there was still 30%, albeit down from 36%, of respondents who intend to be a bit more or a lot more aggressive.
As foreshadowed in the June 2011 survey, which also saw a drop in the Index, more investors have increased their investment allocation (weighted by Investible Assets) to safer investments such as deposits and general and term insurance products in the last six months.
Investment allocation to mutual funds also saw an increase, from 12% to 14% while stocks, bonds and other stock market derivative products declined to 20% from 24%. In addition, overall ownership of mutual funds grew from 53% to 57% from June to December 2011.
Brian Tan, Head of Retail Sales, J.P Morgan Asset Management, Singapore, said: "We are pleased that the Index has proven to be an accurate gauge of investors" future behavior. We see a positive correlation between the sentiment expressed and how investors actually position their portfolios six months down the road.
"The trend has been a flight to quality and to safe haven investments such as deposits and bond funds that are generally less volatile than equity funds. We expect it will be more of the same in the coming months although we think investors should diversify and also invest in riskier assets given the attractive valuations."
The J. P. Morgan Confidence Index is derived from a scoring of investors’ responses to a series of questions on their outlook for the Straits Times Index, local and global economic and investment environments, appreciation in their investment portfolio, and the likelihood of increasing their personal investments over the next six months. An index level of 100 is neutral, while 200 is extremely optimistic while zero is extremely pessimistic.
In terms of asset allocation, while there has been a slight increase to safer instruments/regions (deposits and general and term insurance) over the past 6 months, most investors in the latest survey are planning to maintain their current allocation to the financials products that they are already invested in over the next 6 months.
By investment category in the next six months, Singapore remains the favourite among respondents, (largest drop of 19%) followed by Asian regional and real estate. More investors are shunning US and Europe because of perceived higher risks.
On the Singapore economy, a growing number of respondents believe it will not perform better in the next six months (57% against 12% previously) while 22% (59% previously) believe there is still a likelihood of improved performance.
Mr Tan said in the current uncertain investment climate, Singapore retail investors should strive to maintain a portfolio which diversifies risks across different asset classes as well as within each asset class. "The survey shows that more and more retail investors are appreciating the diversification benefits that mutual funds provide."
"J.P. Morgan Asset Management will continue to bring our global capabilities to investors in Singapore and provide them with a range of investment options and different ways to express their currency views."
On the Singapore Dollar, 83% expect the local currency to remain stable or strengthen against the US Dollar, down from 96% in June. Among those who expect a stronger Singapore Dollar, 46% plan to invest in Singapore dollar denominated assets in the next six months.
With assets under supervision of US$1.8 trillion and assets under management of US$1.3 trillion, J.P. Morgan Asset Management is one of the largest asset and wealth managers in the world.
The semi-annual survey, commissioned by J.P Morgan Asset Management, was conducted by TNS, an independent market research company. It was conducted in December 2011 across a sample of 502 investors with an annual personal income of more than S$60,000 and a minimum of five years of continuous investment experience. To view the results, please visit http://www.jpmorganam.com.sg.
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