Hong Kong investor sentiment at its weakest

The JF Investor Confidence Index shows Hong Kong investors are extremely negative about global markets, but are a tad optimistic about local shares.
The JF Investor Confidence Index in Hong Kong, which is designed to measure the outlook of retail investors in the local market over the next six months, shows that sentiment is at its lowest since the index was introduced more than two years ago.

The September index level, based on a JF Asset Management survey, was at 95, falling below its neutral level of 100 for the first time since July 2006. The index was at 119 in June. The index clearly reflects the weak confidence of investors towards the global economy and financial markets, which have been severely affected by turmoil.

ôThe Index shows a sharp downturn in investor sentiment towards the stock market and the global economic environment. Concerted global action to alleviate the credit crunch and support the financial system will take some time to be seen to be having an impact,ö says Terry Pan, head of retail business at JF Asset Management.

While investors are feeling much more negative towards global markets, the survey shows that this applies less to the Hong Kong stock market. The sub-index representing the outlook for the Hang Seng Index was at 110, making it the only sub-index in the survey staying above a neutral level of 100.

There is still some optimism in the Hong Kong market as 43% of surveyed respondents expect an increase in the Hang Seng Index in the next six months from the current depressed level. In particular, 26% of investors still expect the Hang Seng Index to exceed 20,000 at the end of 2008.

The JF investor confidence survey covers six areas: the Hong Kong stock market performance, the local economic environment, the local investment environment, the global economic environment, personal asset valuations, and amount of investments. Each of those index components registered an increase in the latest survey, with the exception of plans to increase investments.

Despite the recent financial crisis, 46% of survey respondents this quarter indicated a preference for aggressive investment strategies û a similar level to the 44% observed in the last quarter. Also, 78% of aggressive investors and 84% of conservative investors will concentrate their investments in Hong Kong. Compared with 72% observed in the last quarter, the aggressive investors are shifting some attention from overseas to the Hong Kong market, a natural response of investors everywhere in troubled times.

The survey also shows that 29% of survey respondents have invested in overseas markets over the past six months. In terms of market preferences, China, Europe and the US were their preferred overseas markets.
ôConfirmation begins to take shape that AsiaÆs economies will slow materially, confounding the earlier decoupling hypothesis. And as a result of slowing economic growth, we will continue to see earnings downgrades for corporate Asia during the next 12 months,ö says Geoff Lewis, head of investment services at JF Asset Management.

ôHowever, continued urbanisation accompanied by higher incomes and rising domestic demand now stand a good chance of becoming the key macroeconomic drivers for the region. AsiaÆs billion consumers could turn out to be the boomers of the coming decade,ö Lewis adds.

Cimigo, an independent market research company, was commissioned to conduct the survey on behalf of JF Asset Management. The survey was developed by interviewing a random sampling of 508 retail investors aged between 21 and 60 who have liquid assets in excess of HK$100,000 ($12,800). The survey was completed at the end of September 2008.

Another investor sentiment survey released earlier by ING Investment Management also shows confidence levels at record lows.
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