Recent surveys have signalled that local investors are pulling back from the market and stashing cash in their savings accounts as they come to grips with news that the global economy may be sinking deeper into recession.
ING’s barometer of Hong Kong investor sentiment plunged further into negative territory last quarter, dropping from 79 to 62 on a scale of 0 to 200. Only Singapore and Thailand ranked lower in Asia excluding Japan.
“We’re not surprised,” said Nicholas Toovey, the regional head of equity at ING Investment Management. “Hong Kong and Singapore are similar in that they are financial centres and small international economies that are exposed to the rest of the world.”
The global financial system teetered on the edge of collapse at the end of last year after the fall of Lehman Brothers and Merrill Lynch sparked a dash for cash. Hedge funds unwound positions to meet redemptions and credit markets froze up, pushing investors to the sidelines.
And investors may be worried that they are not out of the woods yet, as negative economic figures pile up. More than two-thirds of respondents in the ING survey expect the local economy to deteriorate this quarter and 76 per cent believe residential property prices will decline.
“In Hong Kong, property markets more than anything else drives sentiment and that in turn affects the stock market,” said Bratin Sanyal, head of Asian equity investments at ING. “And given that the property market has turned south, it’s no surprise that investor sentiment is so bearish.”
In another survey, by JP Morgan Asset Management, 79 per cent of respondents said they had cut expenses to cope with the downturn. More than three out of four said they had pumped the extra money into savings accounts, compared with fewer than one in five who put the cash into the stock market.
“When the going gets tough, most of us will want more cash in the pocket, more emergency money, just in case things are not going as well,” said Terry Pan, the head of retail business at JP Morgan Asset Management. “In terms of the product or the vehicle that [investors] are putting this additional cash in, it highlights the caution.”
While the JP Morgan Investor Confidence Index actually edged up last quarter from 95 to 98 on a scale of 0 to 200, respondents still seemed to be bracing for a long haul of stagnant market conditions.
Survey respondents on average expected the Hang Seng Index to finish the first half of this year at 16,054, down sharply from the previous survey’s forecast, which set a target of 19,270 for the end of last year.
Just 23 per cent of the polled investors planned to increase their investments.
But across the border, there was at least a small ray of hope shining through the gloom. The ING Investor Dashboard Sentiment Index reading for the mainland jumped the most in the region last quarter, increasing from 88 to 103.
“Mainland respondents may be encouraged by the measures the government has taken, or have said they are going to take, to stimulate the market,” Mr. Toovey said.
The Xinhua Finance/MNI China Business Survey for January also improved, advancing for the first time in four months.
The measurement of business conditions on the mainland was still below the neutral reading of 50, however, after rising from 35.20 in December to 41.67.
While a recovery in the financial system and equity markets around the region may not yet be on the cards, a prolonged downturn in investor interest could create some possible bargains.
“We think there’s going to be continued volatility in the market,” said Mr. Toovey, who added that a sustainable rebound might not occur until next year and that he was underweight on regional equities.
“But as active fund managers, if [the market] goes lower and there is an opportunity to get stocks cheaper, we will take that opportunity.”
And while investors are bracing themselves for more bad news in the near term, they may be gaining confidence that the bevy of stimulus packages announced last year could jump-start the global economy.
State Street Global Markets recently announced that its monthly measurement of global investor sentiment rose in January for the first time in four months.
The global sentiment reading for the State Street Investor Confidence Index surged from 48.2 to 60.3. Meanwhile, the regional barometer for Asian investors held steady, inching downwards from 86.6 to 86.3.
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Investor sentiment plunges further
Surveys show locals shunning the market
Nick Westra
8 February 2009
Recent surveys have signalled that local investors are pulling back from the market and stashing cash in their savings accounts as they come to grips with news that the global economy may be sinking deeper into recession.
ING’s barometer of Hong Kong investor sentiment plunged further into negative territory last quarter, dropping from 79 to 62 on a scale of 0 to 200. Only Singapore and Thailand ranked lower in Asia excluding Japan.
“We’re not surprised,” said Nicholas Toovey, the regional head of equity at ING Investment Management. “Hong Kong and Singapore are similar in that they are financial centres and small international economies that are exposed to the rest of the world.”
The global financial system teetered on the edge of collapse at the end of last year after the fall of Lehman Brothers and Merrill Lynch sparked a dash for cash. Hedge funds unwound positions to meet redemptions and credit markets froze up, pushing investors to the sidelines.
And investors may be worried that they are not out of the woods yet, as negative economic figures pile up. More than two-thirds of respondents in the ING survey expect the local economy to deteriorate this quarter and 76 per cent believe residential property prices will decline.
“In Hong Kong, property markets more than anything else drives sentiment and that in turn affects the stock market,” said Bratin Sanyal, head of Asian equity investments at ING. “And given that the property market has turned south, it’s no surprise that investor sentiment is so bearish.”
In another survey, by JP Morgan Asset Management, 79 per cent of respondents said they had cut expenses to cope with the downturn. More than three out of four said they had pumped the extra money into savings accounts, compared with fewer than one in five who put the cash into the stock market.
“When the going gets tough, most of us will want more cash in the pocket, more emergency money, just in case things are not going as well,” said Terry Pan, the head of retail business at JP Morgan Asset Management. “In terms of the product or the vehicle that [investors] are putting this additional cash in, it highlights the caution.”
While the JP Morgan Investor Confidence Index actually edged up last quarter from 95 to 98 on a scale of 0 to 200, respondents still seemed to be bracing for a long haul of stagnant market conditions.
Survey respondents on average expected the Hang Seng Index to finish the first half of this year at 16,054, down sharply from the previous survey’s forecast, which set a target of 19,270 for the end of last year.
Just 23 per cent of the polled investors planned to increase their investments.
But across the border, there was at least a small ray of hope shining through the gloom. The ING Investor Dashboard Sentiment Index reading for the mainland jumped the most in the region last quarter, increasing from 88 to 103.
“Mainland respondents may be encouraged by the measures the government has taken, or have said they are going to take, to stimulate the market,” Mr. Toovey said.
The Xinhua Finance/MNI China Business Survey for January also improved, advancing for the first time in four months.
The measurement of business conditions on the mainland was still below the neutral reading of 50, however, after rising from 35.20 in December to 41.67.
While a recovery in the financial system and equity markets around the region may not yet be on the cards, a prolonged downturn in investor interest could create some possible bargains.
“We think there’s going to be continued volatility in the market,” said Mr. Toovey, who added that a sustainable rebound might not occur until next year and that he was underweight on regional equities.
“But as active fund managers, if [the market] goes lower and there is an opportunity to get stocks cheaper, we will take that opportunity.”
And while investors are bracing themselves for more bad news in the near term, they may be gaining confidence that the bevy of stimulus packages announced last year could jump-start the global economy.
State Street Global Markets recently announced that its monthly measurement of global investor sentiment rose in January for the first time in four months.
The global sentiment reading for the State Street Investor Confidence Index surged from 48.2 to 60.3. Meanwhile, the regional barometer for Asian investors held steady, inching downwards from 86.6 to 86.3.
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