Investment execs widely bearish: CFA survey

The CFA Institute 2013 market sentiment survey reveals widely varying – but generally pessimistic – views from Asian respondents compared to those elsewhere.
Investment execs widely bearish: CFA survey

Investment professionals worldwide are more optimistic than last year about global economic growth for the coming year, but remain bearish in many areas, according to the CFA Institute 2013 Global Market Sentiment Survey*.

The poll, due for official release today, covers questions on investment and macroeconomic outlook to views on employment opportunities for investment professionals.

In line with a widespread view among investors, equities are expected to perform best out of all asset classes in 2013 by total return. Half of respondents globally think equities will provide the highest expected total return in 2013, up from 41% a year ago, compared to bonds, cash, commodities and precious metals (the latter being the second most cited asset class).

A smaller proportion (41%) of Asia-Pacific respondents cited equities, though it was still their favoured asset class in terms of expected return and 11 percentage points up on last year's figure.

Asia-Pacific investors were the most bullish on debt, with 14% citing bonds as likely to perform best in 2013, versus 8% globally saying the same. Japanese respondents were by far the most bullish on bonds with 36% citing them as the likely top performer, followed by Chinese investors (23%).

Not surprisingly, views on which equity market will provide the best opportunity next year varied depending on the location of respondents. Globally, the US was the most popular with 32% citing it, along with 41% of North Americans, but only 20% of those in Asia-Pacific. China was easily the top choice among Asia-Pacific respondents, garnering 34% of responses (compared with 17% globally and 12% of North Americans).

Individual stocks and bonds were the most popular investment vehicles, with 38% of global and 43% of Asia-Pacific respondents citing them as those they will use most next year. That was followed by the fast-growing exchange-traded funds market (global 24%, Asia-Pacific 18%) and mutual funds (global 16%, Asia Pacific 10%).

Expectations for employment opportunities for investment professionals are globally fairly bearish, with only 17% globally expecting them to improve and 33% saying they will worsen.

However, the outlook is brighter in Asia-Pacific, with 23% expecting an improvement in prospects. The most optimistic in the region about job opportunities are Indians (44% expect to see improvement) and Chinese (30%), although 36% in China expect a drop in employment prospects.

Hong Kongers are less optimistic, with only 15% expecting an improvement and 40% envisaging a decrease. Taiwan has the gloomiest outlook, with only 3% expecting an increase, while 70% believe there will be fewer opportunities.

Turning to the macro outlook, Chinese investors are by some way the most pessimistic on the global economy for next year. Only a fifth (21%) say it will expand next year, with the rest suggesting it will either stay the same or contract.

Interestingly, the outlook is significantly more bullish among respondents in Europe, with Germany, Spain and the UK all with a majority – respectively 62%, 61% and 55% – saying the global economy will expand in 2013.

US investors lie in-between, with 39% suggesting there will be an expansion. This is in line with the global response of 40%, up from 34% last year. Overall the global outlook is more bullish than last year, when 29% of respondents said they foresaw a contraction in 2012, compared with 20% this year.

Going more granular, investors in the 'developing markets' category were the most bullish about their own markets, with 56% expecting their local economy to expand. That compares with a global figure of 45% and 46% in Asia-Pacific. Indian respondents were by far the most bullish in Asia-Pacific, with 69% expecting their economy to expand next year, with 44% saying the same in China.

Views were relatively pessimistic on the European debt crisis, with around a quarter (23%) globally saying it will ease next year, while 35% think it will get worse. European investors, again, were more bullish than those in Asia or the US. Spain was the most optimistic nation, with over half (53%) of the respondents there saying the situation will ease in 2013.

The European crisis was cited as the biggest risk to global capital markets for next year (cited by 37% globally and 36% in Asia-Pacific), with 'weak economic conditions' coming second (31% globally, 35% Asia-Pacific). These two factors were by far the most cited risks.

Finally, there is a widespread view that ethical culture and behaviour within financial firms must change. More than half of global respondents (56%) cited a lack of ethical culture within financial firms as the primary contributor to the low level of industry trust, with the portion slightly higher in Asia-Pacific (59%).

Respondents globally said the most effective remedy would be to improve ethical culture within top management, which was chosen by 40% as the action that is most needed. A further 26% identified increased adherence to ethical codes and standards above all.

“We’ve seen the industry become more vocal about the behaviour that led to the global financial crisis, and survey respondents are emphatic about the need for a stronger ethical culture at financial firms,” says Kurt Schacht, managing director of standards and financial market integrity at CFA Institute.

*The survey of all 115,000 CFA Institute members was conducted from October 30 to November 13, and 6,783 responded, of which 60% (3,881) were based in North America, and 16% in Asia Pacific.

¬ Haymarket Media Limited. All rights reserved.