Asian investors want to take on more investment risk than their peers elsewhere, but regularly overestimate the returns they can get, particularly in Hong Kong and China, according to a new survey by Legg Mason.
The fifth annual Global Investment Survey – to be published today – polled 15,300 investors in 17 markets in January and February, of which 4,500 were based in Asia Pacific.
Legg Mason said it wanted to gain a broad swathe of respondents, from baby-boomer, mass-affluent investors to 18-to-25-year-olds.
All told, 45% of Asia-Pacific investors said they wanted to take on more investment risk, versus 37% for global respondents. The figure rose to 51% for Chinese respondents and 56% for those from Hong Kong.
“It’s possible Hong Kong investors feel they sat on the sidelines too long, amid last year’s Black Swan events, and didn’t take advantage of the 20% rise in Hong Kong stocks year-to-date,” said Freeman Tsang, director at Legg Mason.
He was referring to shock outcomes such as the UK’s vote to leave the European Union in June and the November election of Donald Trump as US president.
This risk-taking mindset appears to be reflected in the general lifestyle choices of Asian investors that seems to confound the stereotype of them as savers.
“Traditionally I’d have said Asians prefer to be gatherers, investing for tomorrow, but a majority of them identify as strivers, living for today but planning for tomorrow,” said Lennie Lim, head of Asia at Legg Mason.
Singaporean investors, in fact, identify themselves as some of most conservative in the world and many are heavily influenced by the 2008 financial crisis, said Clement Lee, head of sales for Southeast Asia. Three-quarters of Singaporean respondents described themselves as being conservative investors, he noted, compared to the global average of 56% and the 53% in greater China.
Yet Singaporean investors also sought more returns than they had been achieving. Millennials, Generation X and baby-boomers in the city-state said they wanted to get 7.24%, 6.88% and 6.52% from income-producing investments, but admitted they only getting 5.48%, 4.96% and 5.14% in 2016 respectively. For all their self-proclaimed conservatism, investor expectations in the country appear too high.
Yet this is true across the region. Investors in Asia Pacific are getting a return on investment of 5.67%, versus expectations of 7.7%, noted Lim. “The fact is that investors are placing too much in cash to meet their needs.”
... yet heavily into cash
The level of cash held by Hong Kong investors in particular came as a surprise, given the city’s reputation as a haven of speculators.
Tsang said: “It is a big contrast when you consider that when we asked the question: ‘What was your biggest investing regret over the last two years?’, the popular answer from most Asian countries was ‘I sat on the sidelines too long and got the market timing wrong’.”
Nearly 40% of respondents in Hong Kong named cash as their top investment preference, versus 27% for equity and 12% fixed income. It was a very different story in China, where 27% put fixed income first, then 24% chose cash and just 17% equities.
Other interesting findings concerned Hong Kong investors’ levels of optimism and home ownership.
Only 46% were highly optimistic about investing, versus 60% globally and a whopping 80% in China. Meanwhile, the territory's sky-high property prices mean 44% of the 1,800 investors in the territory said they owned a home, versus 57% globally.