• Cash-rich Asian investors eye stable placements

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    CASH-rich investors in Asia are opting to hold on to their disposable wealth while waiting for prospects of either steady, modest returns (47 percent) or guaranteed income (41 percent).

    This was reflected in the investor sentiment toward fixed income investments, which held up well relative to the other assets, according to the third quarter survey of 3,500 interviewees released by Robert Cook, chief executive officer of Manulife Financial in Asia.

    “The survey is clear that Asia investors aren’t looking for excitement. They want secure, steady investment returns. From their perspective that makes a lot of sense, particularly when saving for long-term goals,” he noted.

    Investors across the region cited market volatility as the main reason for having less appetite for stocks. The prospect of a tapering of the bond-buying program of the US Federal Reserve also fueled concerns in the Philippines and the rest of the region. However, the increasingly negative sentiment toward stocks was not mirrored in actual investment holdings, and when asked which asset classes they would choose if they were to make further investments, stocks remained the most popular choice, Cook added.

    Sentiment toward property also fell in most markets, reflecting government interventions to cool prices or increase supply. Sentiment fell sharply in Indonesia, Japan and Taiwan. The most pessimistic investors on property, though, were in Hong Kong. In this market, overall sentiment started negative in the first quarter this year and has continued to decline since, as more than two-thirds of investors there believe that current prices of properties are too high and that a correction is likely, Cook said.

    “Investor uncertainty has been largely fueled by the prospect of the Fed tapering its quantitative easing program and the protracted debt-ceiling impasse. With the Fed announcing plans to begin tapering of bond purchases, bond investors began selling their holdings in emerging markets, particularly those with current account and budget deficits,” said Ronald CC Chan, head of Equities, Asia for Manulife Asset Management.

    “This brought about currency weakness in these markets which, combined with weak May-to-July Purchasing Managers Index [PMI] readings from China, led investment sentiment on equities to decline during the third quarter,” he added.

    Attractive valuations
    Chan said that sentiment on equities has yet to recover in much of Asia, but that valuations are attractive in many markets.

    “We are optimistic on the mid- to long-term outlook. The tapering of quantitative easing is inevitable, but the Fed has indicated that interest rates will remain low to support further growth. Meanwhile, China, Taiwan and Korea all posted positive Flash PMI readings for August and September. In addition, governments in the region are taking steps to tackle issues such as current account imbalances and inflation,” he added.

    In the Philippines, investors’ sentiment in the third quarter was also dampened by the uncertainty over the timing and pace of tapering of the Fed’s latest quantitative easing (QE3) or bond-buying program.

    “The eventual winding down of QE3 has stoked expectations that global interest rates would drift higher and that fund outflows from emerging markets would accelerate,” said Aira Gaspar, CFA, chief investment officer of Manulife Philippines.

    “While the Philippines is not immune to shifts in capital flows, the continual domestic liquidity formation, the sanguine economic growth prospects and the improving credit metrics of the Philippines are supportive of a low interest rate environment and corporate earnings growth,” he added.

    The Philippines’ continual domestic liquidity formation and resilient private consumption draw structural support from robust overseas workers remittance flows, which have not fallen below $1 billion a month since May 2006,” Gaspar added.

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