Straits Times: Wed, Jul 04
RETAIL investors in Singapore have turned a bit optimistic in their investment outlook for the next half- year compared with six months ago, but remain cautious, according to a survey by JP Morgan Asset Management.
The survey showed the JP Morgan Investor Confidence Index (ICI) rising from January's 86 points - the lowest confidence level registered since the semi-annual poll was first conducted at the end of 2010 - to a moderate 101 points in the latest survey conducted from May 29 to June 7. A score of 100 signifies a neutral confidence level.
The ICI, which is based on survey questions on the domestic and external economy, found that Singapore retail investors are most confident about domestic factors such as the local economy and investment market environment, as well as the Straits Times Index (STI). Confidence in the Singapore economy experienced the greatest boost, rising 24 per cent compared to six months ago.
Such confidence translates into a rise in planned investment, as 41 per cent of investors plan to increase their investment in the next six months, up from 32 per cent six months ago. These investments are likely to be made in Singapore, Asian regional and real estate categories, in asset allocations of deposits, stocks and related derivatives as well as insurance products.
Nevertheless, 80 per cent of investors remain cautious about risks and are looking for capital preservation in their investments. Such caution stems largely from external events such as the European debt crisis and the weakness in global markets.
However, domestic inflation was also cited as a key factor, with 86 per cent of respondents expecting inflation to remain at or increase from its current level of 5.4 per cent, due to rising housing costs and stabilising at 5.5 per cent over the next six months. Such expectations are higher than the Monetary Authority of Singapore's (MAS) forecast of CPI-All Items inflation at 3.5-4.5 per cent.
Brian Tan, head of retail sales at JP Morgan Asset Management Singapore, noted that the high expected inflation rates, coupled with low interest rates, would erode the value of investors' savings. He thus recommended investors who seek income to look beyond traditional asset classes (such as bonds and deposits) and to move towards high-yield bonds, emerging market debt, real estate investment trusts (Reits) and high-dividend-yield equities instead.
Geoff Lewis, global strategist at JP Morgan, added that investors should look at dividends over the long run, rather than just price indices alone, as dividends account for a significant proportion of S&P 500 total returns. He said that dividend yields were much stronger in Asia, especially in places such as Singapore, Australia and Japan.
The ICI report also emphasised the importance of multi-asset portfolio diversification to obtain higher returns and enjoy lower risks, given the uncertainties of the eurozone crisis, which lacks an exit roadmap. While the report noted that the risk of a eurozone break-up is small, the global economy still faces structural headwinds from financial deleveraging and fiscal consolidation.
Nonetheless, considering that a lot of bad news has already been priced in for equity returns, less risk- averse investors could consider slowly moving back into the market. The report added that sentiment in the third quarter may improve slightly due to signs of stronger global growth, driven by improvements in China and the United States.
Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)
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