Investor confidence at lowest level in 3 1/2 years

Singapore

RETAIL investor confidence in the Singapore stock market and economy has slumped to its lowest level in 3 1/2 years, a JP Morgan survey has found.

The JP Morgan Investor Confidence Index dropped 15 points to 101 last month, its lowest since June 2012.

The half-yearly survey found that Singaporean investors have become increasingly pessimistic about the local economic environment. Nearly a third of them (31 per cent) said they expected the benchmark Straits Times Index to fall in the next six months; last June, 17 per cent thought so.

The number of respondents who were expecting a weaker economic environment rose to 39 per cent from 22 per cent in June.

A third of the respondents also said they thought better employment opportunities were extremely unlikely in the next six months.

However, investors' risk profiles and investment strategies remained fairly consistent over the past few years; only a minority of investors are planning to cut investments.

But investors are becoming more conservative. Nearly half of the respondents cited capital growth and preservation as their main objective for investing, and a quarter said they invested to generate a stable income stream.

Among investors aiming to generate a stable income, high-dividend stocks were a top pick at 49 per cent. The survey found that Reits, a close second at 47 per cent, have been growing in popularity among investors since the last survey.

Meanwhile, more investors are choosing Singapore investment-grade bonds and high-yield bonds.

In the equity-funds market, investors moved money out of Singapore and Asian regional equity funds. In the mutual-funds market, investors have been allocating increasing amounts of money into balanced and multi-asset funds.

JP Morgan's head of fund sales in Singapore Brian Tan said this increased interest in multi-asset and balanced funds reflects investors' need for flexibility and diversification. He expects to see more volatility ahead.

Turning to the global economy, JP Morgan's managing director Tai Hui said he is cautiously optimistic with regard to global growth in 2016. Given the prospect of lower asset returns this year, he emphasised the importance of dynamic asset allocation and advises investors to employ relative-value strategies to enhance returns and manage risks this year. Such strategies focus on identifying discrepancies in the prices of the same or similar securities.