Asian investors keeping their hopes up

Many Asian mass affluent investors polled by ING prefer investing in local shares; respondents have a low regard for bonds and fixed-income instruments at the moment.
Asian investors, save for those in Japan, are extremely upbeat over the prospects of their economies and financial markets over the short-term, according to the results of the first ING investor sentiment tracking study.

Investors in China and India, the two hottest Asian economies, are the most bullish. More than 70% of the mass affluent investors surveyed in both markets believe their respective economies will improve over the coming months. They are followed by investors in Malaysia and the Philippines, where 60% and 56% of the respondents had healthy outlook for their domestic economies. In Hong Kong and Singapore, the investors are more conservative with their expectations.

With only 26% of the respondents believing their economy will improve, Japanese investors are the most bearish in the region, which is likely a reflection of the countryÆs changing political landscape. ING Investment Management notes that a few ôpolitical disastersö have affected investor sentiment in Japan, including the missing pension records, the suicide of the Agriculture Minister before his hearings on corruption charges, and the resignation of the Defence Minister.

This is the first of a quarterly survey by ING Asia-Pacific to track and anticipate changes in investor sentiment across 13 markets in the region. ING defines mass affluent as individuals aged 30 years and older, with disposable assets of at least $100,000 except in the Philippines and Indonesia, where the cut-off is lower.

The survey findings suggest a possible correlation between the investorsÆ level of sophistication and their confidence in the market. Investors in more mature economies such as Australia, Hong Kong, Japan and Singapore are more conservative in their outlook, while those in China and India û where the portfolio investing history is relatively short û are extremely optimistic.

Investors in China û which has experienced an extended bull run in recent months û are the most positive. A total of 70% of the respondents expect their stock market to continue to rise over the coming months. Out of those respondents, 31% expect the rise in share prices to be considerable û a figure thatÆs only 18% in South Korea, 16% in Hong Kong, 15% in Singapore and 14% in India.

Most investors across Asia believe the investment climate will continue to be positive. Still, most û except for those in China and the Philippines û donÆt expect their return on investments to be as strong as the previous three months.

ôGiven the already good performance seen in the last three months, investors in more established markets donÆt expect the same magnitude of increase in the future. However, investors in thriving economies still remain very optimistic,ö says Chris Ryan, chief executive officer at ING Investment Management Asia-Pacific.

Local stocks are the most popular investments Asia. That asset class is the top pick of investors in more than half the surveyed markets including Japan, Hong Kong, Singapore, South Korea, China, Taiwan and Thailand.

The second most popular investment choice is property, which is the preference of investors in Australia, New Zealand, Indonesia and India. Respondents considering investing in property over the coming months are most interested in China, Australasia and Vietnam.

Cash and deposits are the preferred investments in Malaysia and the Philippines.

Investors in very few markets cite gold, foreign currency; stocks listed overseas, real estate investment trusts, allocated pension and superannuation among their top choices.

Bonds and fixed-income instruments arenÆt among the top choices in any market in Asia.

When it comes to their motivation for investing, most respondents in more mature markets such as Australia and New Zealand cite retirement. Most investors in Thailand and India cite capital preservation, reflecting their conservative stance at the moment. Most investors in Indonesia, where education costs are expensive relative to income, cite education. Most of the respondents in the other markets cite wealth accumulation.

The survey shows the appetite for initial public offerings in Hong Kong remains strong, with nearly 90% of the respondents in that market saying they will apply for IPO allocations over the coming months.

Research firm Taylor Nelson Sores (TNS) conducted this survey in July and August among 1,308 mass affluent investors in Australia, China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Thailand. The investors were asked to consider a three-month horizon when answering questions about the future.

The maiden survey, which was conducted just as the fallout from the US credit crisis in the US was spreading in Asia, is the first to poll investor sentiment across the 13 Asia-Pacific countries. The next survey is expected to be released around January 2008.
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