Volatility in the financial markets has dampened the enthusiasm of Filipino investors, prompting more of them to rely on cash as their “best-of-the-worst” investment strategy, a financial services firm said.
Manulife Philippines on Monday cited results from its Manulife Investor Sentiment Index (MISI) survey, which found that Filipino investors are increasingly relying on cash as their investment choice in a volatile market.
The survey revealed a dramatic fall in positive sentiment toward all asset classes in the fourth quarter of 2015, due to concerns that market conditions are unlikely to improve.
Sentiment toward fixed income securities, equities and mutual funds in the fourth quarter of 2015 have all decreased since the second quarter, down to 60 from 81, 64 from 83, and 61 from 84, respectively.
“Cash, however, has been the least affected, with many investors changing their investment strategy to increase their cash holdings,” it said.
It said sentiment toward cash dropped less significantly, although it still fell more than 10 percentage points, to 76 from 88.
Manulife’s survey also revealed that this negative shift in sentiment can largely be attributed to concerns about market volatility and doubts that market conditions will improve.
“Fewer people expect market conditions to improve, which may explain the fall in sentiment,” it said.
While investor sentiment toward cash did decline, the survey stressed that cash still ranks as the most preferred asset class, with Filipino investors increasing their cash holdings to 34 percent of their total assets from 23 percent in the last survey.
In addition, 40 percent of investors are looking to invest more in or start investing in cash in their local currency.
As a result of this concern about market volatility, MISI showed that one fifth or 20 percent of investors expect a 5 percent or less return on their investment, up from only 8 percent of investors since the last survey.
Meanwhile, only 12 percent expect a return of 10 percent to 15 percent on their investment, a sharp fall from 28 percent in the second quarter of 2015.
“This may explain why cash remains the most favored asset class, with investors seeking investments they perceive to be less risky,” the survey concluded.
Manulife’s MISI survey is designed to track investor attitudes toward financial planning, in order to better understand investors’ needs and identify areas for increased financial literacy.
It is a half-yearly, proprietary survey measuring and tracking investors’ views on their attitudes toward key asset classes and issues related to personal financial planning.
The Index is calculated as a net score for each asset class. The overall index is calculated as an average of the index figures of asset classes. A positive number means a positive sentiment, zero means a neutral sentiment, and a negative number means negative sentiment.
The MISI is based on 500 online interviews in Metro Manila and Cebu, which were conducted from October 20 to November 11 of last year.
Respondents are middle class to affluent investors, aged 25 years and above who are the primary decision maker of financial matters in the household and currently have investment products.