This year’s hot bets deemed to be home country markets and real estate

28 February 2014   Category: News, Asia, Global   By Asia Asset Management

Asia-Pacific investors continue to be optimistic about reaching their financial goals, and are particularly confident about their home countries’ stock market performance and the performance of real estate, both in 2014 and beyond, according to the Franklin Templeton Global Investor Sentiment Survey released on February 27. The online survey was conducted in 22 countries, including Australia, China, Hong Kong, India, Japan, Korea, Malaysia, and Singapore in the Asia Pacific region.

Optimism about home country performance and reaching financial goals

Asia-Pacific investors are generally optimistic about the stock market performance in their home countries, with over half (58%) believing that it will improve in 2014, but they are still not as optimistic as their European (64%) and American counterparts (69%). The most optimistic are Indian investors, 82% of whom believe the Indian stock market will go up this year. The biggest change in heart comes from Chinese investors, with 51% believing the Chinese stock market will go up this year, compared to only 14% in 2013. Korea has also seen a significant increase in confidence towards its stock market, with 47% of Korean investors believing that their stock market will go up this year, compared to just 26% last year. The survey also revealed a shift in sentiment in some Asia-Pacific countries, for instance, Malaysia, demonstrating less home country-bias and looking more to other Asian countries for better stock market performance.

Approximately a third of Asia-Pacific investors continue to believe that their home countries will provide the best equity and fixed income returns in 2014 and beyond. Japanese investors are most likely (54%) to predict their home country will have the best equity returns in 2014, while Chinese investors are most likely (45%) to predict their home country will have the best equity returns in the long run. When it comes to fixed income investments, Australian investors are the most likely to predict their home country will have the best returns both in 2014 (50%) as well as over the next ten years (46%).

Given the findings above, it comes as no surprise that 38% of Asia-Pacific investors plan to add to their portfolio or increase their investments in equities in their home countries in 2014.

Moreover, Asia-Pacific investors also have higher expectations for average annual rates of return than those in Europe, the US and Canada. Eighty percent of Asia-Pacific investors believe they will be able to reach their financial goals in 2014. The survey data from almost all Asia-Pacific countries, except Korea, note over 80% of investors being optimistic about reaching their financial goals.

Top concerns on investing in developed markets

Although Asia-Pacific investors will be taking a less conservative investment approach in 2014 than they reported last year, 30% still rank the eurozone debt crisis as their top concern about investing in Europe. Compared to other regions, Asia-Pacific investors have the most concerns about investing in the US. Investors are more concerned about the tapering of the US Federal Reserve’s bond buying programme than other regions.

“Investors are now more ready to re-enter equity markets and increasingly recognize that it is important to keep equities in their portfolio to help achieve their long-term financial goals,” said Mark Browning, managing director, Asia, at Franklin Templeton Investments. “Although sentiment amongst investors towards Europe remains cautious and ongoing market volatility might be a cause for concern, we believe markets around the globe will gain momentum and investors can capture the best opportunities in 2014 by looking beyond their home countries.”

Views on alternative investments

More Asia-Pacific investors believe that alternative investments will perform better in 2014. Expectations for alternatives jumped with 24% of Asia-Pacific investors believing alternatives to perform best this year, compared to just 13% of investors last year. Investors also expect alternatives to perform better over the next 10 years.

“It is interesting to see that the perception of alternatives has improved over the past couple of years. The survey results validate the growing interest we have seen in alternative products from Asia-Pacific investors and at Franklin Templeton, we are well-positioned to serve this market need,” said Mr. Browning. “We offer focused expertise of specialized alternative investments management teams supported by a great depth of resources across our global platform. We are able to offer flexibility in customising product strategies, structures and terms to meet our clients’ distinct needs.”