By Reico Wong
Investors in Singapore are more optimistic about their outlook amid the continued global economic uncertainty, even though this confidence is still limited to the domestic market and the region.
Four in 10 polled in a JP Morgan Asset Management survey of 500 investors last month said they were planning to increase their financial investments over the next six months.
The number of investors who were planning to reduce their market exposure also dropped to 16 per cent, compared to the 25 per cent recorded in the same survey conducted earlier in January.
This pushed up the latest JP Morgan Investor Confidence Index to 101 points, marginally above the 100 mark required for an optimistic reading.
It climbed 15 points from the record low of 86 registered in the last survey, indicating a less gloomy outlook.
A home bias was evident as 61 per cent of the investors said they intended to park their money in Singapore over the next six months, up 4 percentage points from the previous survey.
Investors said they expect the benchmark Straits Times Index to appreciate and the local investment market environment to see an overall improvement.
They said that they felt the European debt crisis was reaching a turning point and were also confident about the Singapore Government's monetary policies.
Confidence about the investment outlook of Asian markets ranked second-highest, with 34 per cent indicating that they are likely to pour funds into regional markets over the next six months.
Meanwhile, investor interest in the United States and even the European market has picked up.
Some 17 per cent of respondents said they would look into investing in the US market, while another 7 per cent said they were thinking of investing in Europe.
This was up 7 and 3 percentage points from the previous survey, respectively.
Mr Brian Tan, head of retail sales at JP Morgan, noted that deposits, stocks and related derivatives, as well as insurance products, ranked as the top three favourite investment instruments of investors here in the next six months.
With the low-interest-rate environment and high inflation expectations, those who seek high levels of cash income should thus look beyond deposits and investmentgrade bonds, he said.
Equities, which are no longer looking overbought, are likely to provide investors with higher yields. This is especially so if they stick with Asian and US stocks, added Mr Tan.
"While we are unlikely to see a catalyst for a major boost to equity returns in the near term, a lot of bad news is already priced in," he said.
"Those with a higher tolerance for risk may want to take advantage of attractive valuations to slowly move back into the market as there are plenty of opportunities for longer-term investors."
Mr Geoff Lewis, a global strategist at JP Morgan, said that the greatest risks now are in safe-haven assets like treasuries and bonds, which are taking on very unfavourable risk-reward ratios.
"The US deficit is still expanding, and if China is no longer buying a lot of US treasuries because of its exchange-rate objectives, since there is actually now some downward pressure on the RMB because of capital outflows, it could be a major game changer," he said.
"It hasn't happened yet, but that is something investors should watch very closely."
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