Asian investor sentiment picks up

An upbeat mood in China and India helps to lift ING's investor sentiment index from pessimistic to neutral for the first time since its launch in the third quarter of 2007.

Investor sentiment in Asia has improved over the last three months, thanks in large part to the more upbeat mood of investors in China and India. That's according to the results of the latest quarterly ING survey that measures the sentiment and behaviour of mass affluent investors around the region.

The ING Investor Dashboard pan-Asia ex-Japan sentiment index rose 16% to 85 for the first quarter of 2009 from 73 in the fourth quarter of 2008. This is the first quarter-on-quarter increase in investor sentiment since the Index was introduced in Q3 2007, moving the index from "pessimistic" back into the "neutral" category. The latest index level is a turnaround from the results of the fourth quarter survey, when investor sentiment deteriorated to 73, which was the lowest level in more than two years.

The most pessimistic investors in Asia are in Hong Kong. This is in line with the results of the J.P. Morgan Investor Confidence Index in Hong Kong, which shows that sentiment for that market has turned bearish once again with toxic assets still worrying investors.

The mood outside of China, India and Hong Kong is generally stable, but investors are waiting for signs of where the financial and economic crisis is headed. The worsening US economy and the state of the domestic economies in Asia are among the main concerns of investors in the region.

The ING index is based on the analysis of a survey commissioned by ING and, for the first time, the survey was carried out by Research International. Before now, the survey has been conducted by research firm TNS. The term 'dashboard' refers to the graphics first used to present the results when the survey was launched, using the control panels of an automobile.

The survey tracks changes in investment sentiment and behaviour across 13 Asian markets, namely Australia, China, Hong Kong, India, Japan, Indonesia, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand. This makes it the first survey to poll investor sentiment across all 13 markets. While the survey covers all those markets, the pan-Asia sentiment index excludes Japan, Australia, and New Zealand.

This latest survey was conducted in March 2009 among 1,347 mass affluent investors in the region, aged 30 years and above, with disposable assets or investments of at least $100,000 with the exception of Indonesia and the Philippines. In Indonesia, respondents had disposable assets or investments of at least $56,000. In the Philippines, respondents with a monthly income of at least Ps250,000 ($5,500) or disposable assets of $100,000 were allowed to take part.

In China, 71% of investors say the government's Rmb4 trillion ($586 billion) two-year economic stimulus package to boost growth and domestic demand has had a positive impact on the local economy. Investors in China have a more positive outlook for the local economy. Around 42% of the respondents say the economic situation has improved in China (versus 22% in the fourth quarter), around 53% say that their return on investments has increased, and around 56% said the economic situation will improve in the next quarter.

"China and India have always been key to driving economies in Asia. In general, there is confidence the Chinese government will continue to step in to help support the economy where necessary," says Alan Harden, CEO of ING Investment Management Asia-Pacific.

Investor optimism in China also appears to have had a spill-over effect on Taiwan, possibly driven by optimism about improved cross-strait relations between China and the Taiwan government. Investor sentiment has increased 25% to 95 from 76 in the fourth quarter.

In India, the strong improvement in investor sentiment was possibly driven by the recovery from the Mumbai terrorist attacks and past corporate scandals. Around 47% of the investors in India expect the economic situation to improve (versus 6% in the previous quartet) around 36% say that their return on investments has increased, and around 63% said the economic situation will improve in the next quarter.

In the case of India, we are definitely starting to see investors bounce back from the global economic recession and the financial services crisis, as well as the local market shocks from the Satyam corporate scandal, particularly as Satyam attracted positive interest from overseas bidders," says Harden. 

Hong Kong investors remain pessimistic, with 47% of Hong Kong investors saying the local economy is in recession and 16% saying it is in a depression, while 74% believe the current economic doldrums is having a negative effect on their wealth accumulation plans. Concerns affecting their investment decisions include the worsening US economy (41% of investors) and the state of the domestic economy (26% of investors). Concerns about growing unemployment and job security also remain high (61% of investors).

Although Hong Kong's property market, a key indicator of the market, picked up over the last quarter, 73% of Hong Kong investors still believe that residential real estate prices will decline in Q2 2009 by 6.5%, indicating expectation of further volatility in the property market.

"The results are not surprising. Although Hong Kong benefits from the strength of the Chinese economy, as a financial hub, it has been outweighed by the impact of the financial crisis and we expect negative Q109 GDP growth of 4.5%," says Harden.

Investor sentiment across the rest of the markets in Asia remains fairly stable, with marginal changes in their index scores, indicating investors are taking stock of developments and are awaiting signs of where the financial and economic crisis is headed. Investors from Southeast Asian markets including Indonesia, the Philippines and Malaysia, however, do appear to have been slightly more impacted by the current global financial and economic crisis, likely due to the decrease in global demand for exports and commodities.

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