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, which is derived from the results of a quarterly JF Asset Management survey conducted by independent market research company Cimigo, recorded a score of 130, slightly lower than 134 in the third quarter of last year. A score of 100 is considered neutral and anything above that is regarded as positive.
The index scored 134 in the third quarter of last year and the fourth quarter of 2006, with both periods marking the most bullish sentiment for the Hong Kong market since the survey was first conducted 18 months ago.
For the latest survey, Cimigo randomly interviewed 500 retail investors in Hong Kong aged 21 to 60, with liquid assets in excess of HK$100,000 ($12,813). The survey was conducted in December, and thus factors in the worries over a US economic slowdown, the fallout from the US credit crisis, and concerns over macroeconomic issues in China.
ôThe index shows that investors in Hong Kong have only been affected to a limited extent by the uncertainties,ö says Edwin Chan, head of institutional and pension business at JF Asset Management in Hong Kong.
He notes that local investors remain optimistic over the mid- to long-term, mainly due to expectations of rising income, better employment opportunities and residential property prices.
The survey shows that 39% of the respondents expect the benchmark Hang Seng Index to trade at between 30,000-35,000 points by year-end. The respondentÆs mean expectation for the index closing level for this year is 31,277, which translates to a relatively modest 16% gain from FridayÆs close of 26,867.01. The Hang Seng Index gained 39% for the year in 2007.
JF Asset Management is bullish over the long-term prospects of the Hong Kong stock market and is unfazed by the concerns that have been weighing on local share prices in recent weeks.
ôWe expect the Hong Kong market to continue to be volatile but we remain confident in the overall economic prospects,ö Chan says. ôWe believe that mainland ChinaÆs tightening measures are about slowing economic growth to sustainable levels, and not about engineering a sharp slowdown in the macro economy or rapid deflation of asset prices.ö
Meanwhile, 52% of the respondents polled said they consider themselves aggressive investors, while the rest said they are conservative. However, even those who claim to be conservative appear to be making huge bets mainly in Hong Kong instead of having a well-diversified portfolio.
ôEven the conservative investors have a tendency to put their eggs in one basket. ThatÆs not really being conservative,ö says Chan.
The respondents who consider themselves conservative investors allocate 80% of their portfolio investments to Hong Kong. They allot the remaining 20% to overseas markets, which as it turns out are mainly China-related shares or the H-shares and red-chips. H-shares are China-registered companies listed on Hong Kong's stock exchange, while red-chips are Hong Kong-registered companies with large interests in China.
ôWeÆve always felt from looking at the results of our surveys that there is not much diversification,ö says Geoff Lewis, head of investment services at JF Asset Management. ôWe are overweight China, but it is not good to ignore other markets. Investors also need to invest in a balanced fund or a bond fund.ö
Signs point to some improvements, though, says Lewis. ôWe are seeing investors increase their holdings in emerging markets and Asia as a region while decreasing their holdings in Japan. They are moving in the right direction, but still are not diversified enough.ö
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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