Hong Kong retail investor sentiment rebounds strongly

The JP Morgan Investor Confidence Index in Hong Kong jumps in June from a previous low, but investors are still proceeding with caution.

The JP Morgan 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 has strongly rebounded from its lowest level of 95 in the first quarter to 119 in the second quarter. The June index shows signs that investor confidence has bottomed out.

Sub-indices representing the Hong Kong economic environment, investment atmosphere, and global economic climate were also up in June.

"The last quarter has seen a long-awaited recovery in investor confidence," says Marco Tang, head of intermediary business at JP Morgan Asset Management.

Investor sentiment has rebounded as the global stock markets rallied during the past three months, and investors are starting to enter the markets in greater numbers. Around 30% of the survey respondents said they would increase their investment in the next six months, higher than the 18% who said the same thing in the first quarter.

Tang notes, however, that investors are still very cautious in the face of market volatility.

"As Hong Kong continues to fight against the current recession, pressure on the labour market will persist," he notes.

Only 12% of the respondents feel that the bear market is over and Hong Kong has re-entered a bull market. Around 54% of the respondents expect Hong Kong's benchmark Hang Seng Index to move sideways between 18,001 and 20,000 points by the end of December.

The JP Morgan Investor Confidence 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.

Meanwhile, the survey also shows that 32% of respondents have invested in overseas markets over the past six months. Most favoured China, emerging markets, and the US.

Grace Tam, vice-president of investment services at JP Morgan Asset Management, notes that while the global economy has stabilised somewhat in the second quarter, full recovery is yet to be confirmed.

JP Morgan Asset Management believes investors are looking for a pullback in the second half of this year as a "digestive" pause.

Over the long-term, with substantial fiscal and monetary stimulus in place, the world economy will continue bottoming out, with signs of renewed growth in China, she says. In particular, risk appetite is slowly picking up in Asia and emerging markets as equities in these markets have historically performed well when global growth begins to recover. If earnings momentum is proven to have turned around in the second half, Asian and emerging markets will inevitably benefit from earnings upgrades, she adds.

Cimigo, an independent market research company, was commissioned to conduct the survey on behalf of JP Morgan Asset Management. The survey was developed by interviewing a random sample of 510 retail investors aged between 30 and 60 who have at least five years of continuous investment experience with liquid assets in excess of HKD100,000 ($12,900). The survey was completed at the end of June 2009.

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