Tuesday, April 26, 2011

S'pore investors eye overseas markets

48 per cent of Singapore respondents hold investments outside their home markets

65 per cent plan to make further investments overseas this year

Investors in Singapore are leading the pack in diversifying overseas, compared with their global counterparts. Their approach appears aggressive, allowing only 2.1 years on average to evaluate the success of an investment opportunity. And over a 10-year horizon, Singapore investors expect a high average annual rate of return of 12.5 per cent.

These are some of the key findings of an inaugural global survey by Franklin Templeton Investments of 13,076 respondents across 12 countries in Asia, Europe and the Americas. Conducted in January, the survey polled about 1,000 respondents - aged 18 to 64 - from Singapore.

It found that about 48 per cent of Singapore respondents hold investments outside their home markets. Coming a close second behind are investors in Hong Kong, with 45 per cent diversifying overseas.

Two in three (65 per cent in Singapore and 64 per cent in Hong Kong) plan to make further investments overseas this year. And three in four (76 per cent in both markets) will do so in the next 10 years.

Singapore and Hong Kong investors are not alone in this trend. The enthusiasm for investing overseas is on the rise across the world.

Globally, one in three respondents invests outside his domestic market, but a larger proportion - up to half - plan to do so by the end of this year. That figure grows further to 62 per cent, or almost two in three, over the next decade.

Overall across the regions, Asian respondents are the likeliest to invest overseas in the next decade (73 per cent), while those in Europe are the least likely (47 per cent) to do so.

Mr Greg Johnson, president and chief executive officer of Franklin Templeton Investments, said: 'With an improved global economic outlook, increasing interconnectivity of world markets and the growth of emerging and frontier markets, investors are increasingly looking worldwide for investment opportunities.'

Singapore respondents surveyed appear aggressive as they allow only 2.1 years on average to evaluate the success of an investment, compared with the global average of three years.

Mr Victor Wong, director of wealth management at Financial Alliance, believes that this is because investors here generally have a short investment horizon. He said that the financial market crisis in 2008 might also have skewed the respondents to a shorter investment horizon.

Warning against such a short- term investment focus, he said: 'If one is accumulating assets to fund a long-term financial objective such as retirement, it is paramount to have a long-term investment horizon so that one can ride through a few market cycles. A market cycle is roughly around five years.?

'Many studies have shown that market timing is very difficult and investors usually will sell at the bottom and buy at the top.'

In addition, local respondents can be demanding. They expect a fairly high average annual rate of return (12.5 per cent) over the next decade, compared with the global average of 11.5 per cent annual rate of return. This is 'definitely high', said Mr Wong, who felt that the result could have been skewed by the good financial market returns in 2009 and last year. ?

'The long-term capital market return is around 8 to 10 per cent per annum and this range should be a more realistic return in the long run,' he added.

Among the various asset classes, stocks and fixed deposits remain the key preferred choices for investment this year, with commodities (including precious metals and non-metal commodities) gaining in popularity.

Four in five, or 81 per cent, of local respondents also indicated plans to invest in unit trusts in the next 12 months, with the largest proportion of one in three, or 31 per cent, doing so through banks.

Brokerages, insurance firms and online portals were the next most popular avenues for this asset class, at 15 per cent, 14 per cent and 13 per cent respectively.

Real estate continues to be popular among Singapore investors, especially in the longer term. More than one in three respondents, or 36 per cent, ranked property as the asset class that will perform the best over the next 10 years.

In the short term, only one in four believes real estate will outperform all other asset classes this year, suggesting that recent cooling measures may have dampened investor confidence.

Equities are a hot favourite among Asian respondents, with half of them holding this investment class and indicating plans to further invest in equities throughout this year. However, they are less confident about their long-term prospects.


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