The inaugural Manulife Investor Sentiment Index in Asia (Manulife ISI), based on 3,500 interviews across seven Asian markets, has revealed that investors in developed Asia are not confident it is the right time to invest, with Hong Kong and Taiwan the most pessimistic. This contrasts with higher confidence in the emerging markets of Indonesia and Malaysia as well as in Canada and the U.S. The interviews were conducted in Hong Kong, China, Taiwan, Japan, and Singapore, Malaysia and Indonesia.
Robert A. Cook, President and CEO, Manulife Asia said, "From an investment point of view, there's no more exciting place than Asia right now. There are so many opportunities across the region for people to invest to achieve their life goals. To help them do that, it's extremely important that we understand investors' needs. The Manulife Investor Sentiment Index helps us do that by providing the kinds of market insights that the Index has been doing in North America now for many years."
This first Manulife ISI in Asia shows that the top reason investors believe it is a bad time to invest is that "the market is too volatile". This is the top answer for all assets except property, regarding which the top reason people offered was "the current price is too high and a correction is expected".
Reflecting the relative pessimism across the region, Asia investors overall indicate they are holding the single biggest portion of their assets in cash, even though respondents in all markets outside Indonesia and Malaysia have only weak confidence that this is an effective investment strategy.
Over half (56%) of Asia investors report being either on track or ahead of schedule to meet their financial goals, significantly more than in Canada. While 10% of Asia investors say they are so far behind schedule they are unlikely to catch up, this is only about half the level in Canada. In terms of achieving their financial goals, the top two most commonly-cited resolutions this year are to learn more about investing, followed by a desire to develop a financial plan. Moreover, more investors in Asia place these as their top resolutions by a factor of two-to-one compared to those in North America.
Despite the current pessimism, the Manulife ISI also shows investors across Asia are relatively optimistic about the future, with the sole exception of Japan. Clear majorities report they expect to be better off in two years' time â€“ very similar to the results in North America.
"The results seem to point to a gap between investors' goals and their strategy to achieve them," said Philip Hampden-Smith, Chief Marketing Officer, Manulife Asia. "Interestingly, it seems many are aware of that gap, which may explain why the highest resolution is learning more about how to invest. It will be fascinating to see how sentiment tracks over time, especially given that most respondents are optimistic about the future."
Manulife Investor Sentiment Index - key findings:Investor sentiment
Investors across markets in Asia have only low levels of confidence that it is a good time to invest, with Hong Kong and Taiwan investors being the most pessimistic. This contrasts sharply with more enthusiastic levels of investor sentiment in the U.S. and Canada and, by far higher margins, in Malaysia and Indonesia. Overall, young Asia investors, aged 25-29, are more optimistic than other age groups, except in Hong Kong, whose young investors appear the most pessimistic in Asia.
Reasons for not investing
Sentiment on the issue of investing in real estate (either their primary residence or other properties) diverges sharply across markets. In Hong Kong and Taiwan net sentiment was clearly negative, whereas sentiment is positive in all other Asia markets, especially Indonesia and Malaysia, as well as in the U.S. and especially Canada. Nearly two thirds of Asia investors saying it is a bad time to invest in stocks report the main reason is "market volatility," a reason cited by over three quarters in China and Malaysia.
Investors in Indonesia report it is a good time to hold cash and invest in property (either their own home or other real estate), with little appetite for stocks, a pattern also evident in Canada. In contrast, in Hong Kong the reverse is true. In Malaysia two-fifths of investors' assets are stored in cash and this aligns with the widely-held sentiment in that country that it is a good time to hold cash. In Japan, though, where cash makes up about the same proportion of investors' assets, sentiment towards cash was clearly negative.
Two thirds of investors in China say they are either on track or ahead of schedule to meet their financial goals. In contrast, in Japan nearly a quarter report being behind schedule and unlikely to catch up. There was agreement across all markets in Asia and North America on the two most cited steps taken to get back on track, these being increasing savings and reducing spending.
Asia investors using a professional financial advisor report more optimism towards investing than those without an advisor. A quarter of Asia investors have a professional financial advisor, versus two fifths in Canada. Of those who do not have an advisor, over a third in Hong Kong, Singapore and Taiwan said the main reason was a lack of trust, which was a factor for only 6% in Canada.
Over two fifths of Asia investors report feeling better off than two years ago, though with variance across the region. In China, 60% agreed with this statement, whereas only a fifth did in Japan. In Singapore, a fifth of investors feel worse off than two years ago, while in Indonesia this is true of just 4%.
A majority (54%) of investors across Asia believe they will be better off in two years' time, an almost identical degree of optimism as in Canada. Looking ahead, the most optimistic Asia investors were in China, where 68% expect to be better off in two years' time. This again contrasted with Japan, where only a quarter expects to be better off in two year's time.
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.