Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
The ING Investor Dashboard pan-Asia ex-Japan sentiment index fell to 73 in the fourth quarter of 2008 from 86 in the third quarter. The latest index level has fallen five straight quarters and is at its lowest level since the survey was launched in October 2007. ThatÆs a 15% fall compared to the previous quarter and a 46% fall year-on-year.
Asian investors have not been able to shake off the nervousness and uncertainty caused by the lingering credit crisis. The majority expect the credit crisis to continue affecting them this year, with around one-third of them believing that their financial situation will deteriorate this quarter. Job security is among their key concerns, given that the global economic downturn is expected to continue pressuring the bottom line of companies across all sectors worldwide.
ôAsian investors continue to take their cue from developments in the global financial markets,ö says Alan Harden, CEO of ING Investment Management for Asia-Pacific. ôWeÆre seeing the trajectory of growth among the economies in Asia impacted by the slowdown in the US and Europe. So it is not surprising to see that investors here are growing more and more cautious.ö
Despite the pessimism of the survey respondents, ING Investment Management expects to see Asia in much better shape than the US or Europe this year, cushioned to a large extent by the large domestic economies in the region. The fund house expects key drivers such as urbanisation and infrastructure development to provide growth over the medium- to long-term.
The ING index is based on the analysis of a quarterly survey commissioned by ING and carried out by Research International for the first time. The survey was previously conducted by research firm TNS since its inception. The term ædashboardÆ refers to the graphics first used to present the results when the survey was launched, using the control panels of an automobile.
The survey tracks changes in investment sentiment and behaviour across 13 Asian markets, namely Australia, China, Hong Kong, India, Japan, Indonesia, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand. This makes it the first survey to poll investor sentiment across all 13 markets. While the survey covers all those markets, the pan-Asia sentiment index excludes Japan, Australia, and New Zealand.
This latest survey was conducted among 1,343 mass affluent investors in the region, aged 30 years and above, with disposable assets or investments of at least $100,000 with the exception of Indonesia and the Philippines. In Indonesia, respondents had disposable assets or investments of at least $56,000, and in the Philippines, respondents with a monthly income of at least Ps250,000 ($5,500) were allowed to take part.
Despite the overall drop in investor sentiment across Asia, there was an upswing in sentiment among investors in China and Taiwan, likely driven by the recent announcement of an economic stimulus package in China and optimism about cross-straits relations and economic stimulus measures in Taiwan.
Sentiment for China has benefited from the Rmb4 trillion ($585 billion) stimulus package announced in November, which is aimed at combating the most serious economic threat to the mainland since the Asian financial crisis in 1997. Before the stimulus package was announced, China was riddled with worries over the impact of the global financial crisis on both domestic consumption and exports.
With foreign reserves and a budget surplus amounting to around $2 trillion, investors are confident that China has the capacity to further stimulate the economy if needed.
Markets that have been affected the most by domestic developments in the last three months of 2008 such as India (Mumbai terrorist attacks) and Thailand (political protests) show the most significant decline in investor sentiment for the fourth quarter.
Understandably, Asian investors continue to have a higher preference for lower-risk investments given the current market volatility. Most are cash-rich, which ING Investment Management believes isnÆt ideal.
ôIn general, holding on to cash is not a savvy investment decision in the long-term as the value of cash will likely depreciate particularly as more government funds are currently being pumped into the economy,ö says Harden. ôOur advice is for investors to look at an investment plan that covers a portfolio of real assets, including equities and real estate, over the course of the year, and to invest in stages each quarter over a one-year period so that their investments are grown at a level that matches their overall risk appetites.ö
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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