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 index rose to 98 in the latest survey in December from 95 in September, when it fell below its neutral level of 100 for the first time since July 2006. The December index shows that overall investor confidence in Hong Kong has stabilised although investors are still wary of the risk of a deeper economic recession in the next six months.
ôLocal investors have adopted a more cautious investment approach as they naturally still have many lingering concerns towards the Hong Kong economy and job market,ö says Terry Pan, head of retail business at J.P. Morgan Asset Management.
Hong Kong investors anticipate that the employment market may deteriorate further over the next six months, according to the survey.
ôWith lower job security and an uncertain economic outlook, investors are unlikely to rush back into the stock market again at this juncture,ö Pan says. However, 80% of survey respondents indicated that they would undertake additional monthly savings, with most of them opting to put extra into conservative products.
Plus, 44% of those surveyed expect an increase in the Hang Seng Index over the next 6 months from the current level. 39% expect the Hang Seng Index to exceed 16,000 at the end of June 2009.
Investors also perceive that the measures taken by the Hong Kong and Beijing governments would facilitate the economic recovery.
The index covers six areas: 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.
Given the uncertain market outlook, 61% of survey respondents this quarter indicated a preference for conservative investment strategies û compared to the 54% observed in the last quarter. Also, 83% of aggressive investors and 94% of conservative investors plan to focus their investments in Hong Kong.
Both aggressive and conservative investors continue to shift their attention from overseas to the Hong Kong market, compared to 78% for aggressive investors and 84% for conservative investors in the last quarter. In the long run, the high concentration of equity investments in the local market may limit the potential scope for returns when the global economy begins to recover, and also increases the risk of portfolio volatility from over-dependence on a single market.
ô2009 will be a difficult year for investors. A continuing decline in corporate earnings and earnings forecasts, together with fears of a bubble in government bond markets and low bank account cash rates, will be a feature of the first half,ö says Geoff Lewis, head of investment services at J.P. Morgan Asset Management.
Lewis notes that 2009 may end on a happier note for equities if investors start to anticipate economic recovery later in the year. Making the correct top-level asset allocation decisions, such as between equities, bonds and cash, will be key, he stresses.
Cimigo, an independent market research company, was commissioned to conduct the survey on behalf of J.P. Morgan Asset Management. The survey was developed by interviewing a random sampling of 506 retail investors aged between 30 and 60 who have at least five years of continuous investment experience with liquid assets in excess of HK$100,000. The survey was completed at the end of December 2008.
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