Bangkok--29 Apr--ING Investor
Investor Sentiment in Thailand Declines but Remains in Optimistic Territory in Q1 2010 ING Investor Dashboard Sentiment Index for Thailand falls to 135 in Q1 2010 from 150 in Q4 2009 as local investors take profits and expectations that the political situation will improve decrease
Key Highlights of the Quarterly ING Investor Dashboard Survey
Thailand Investor Sentiment Index retreats 10% to 135 in Q1 2010 from record high level of 150 in Q4 2009 as political tensions dampen investor sentiment
Pan-Asia Index remains at the same level (145 for Q1 2010 versus 147 for Q4 2009) as investors continue to be optimistic about the future post the financial crisis
Investors cautious of economic developments in the U.S. and China — the top drivers of the global economy; awaiting signs that the U.S. recovery is flowing through to the job market before increasing their investment activity
A majority of Thailand investors believe that their household financial situations will improve but continue to exploit limited investment opportunities and majority concede to being inexperienced or somewhat inexperienced and require expert guidance
Anticipated inflation rate of 3.5 -5.5 % in 2010 drives more Thailand investors from perceived safety of low yield fixed income instruments
ING, the global financial services group, recently released data from its quarterly ING Investor Dashboard Survey that shows investor sentiment in Thailand dipping to 135 in Q1 2010 from 150 in Q4 2009 following a steady post-financial crisis run-up in 2009. Expectations that exports will be a key driver in Thailand’s economic recovery remain high as investor views on favourability of different investment sectors shifts from high to medium risk.
Commenting on the most recent investment sentiment index, Mr Tor Indhavivadhana, Head of Sales and distribution for ING Funds (Thailand) Limited said, “The survey results highlighted the fact that ongoing political tensions have dampened local investor sentiment. While the 7.2% increase in the SET in Q1 2010 was welcome, the primary drivers of these gains were foreign investors who flooded the local equity market during the last quarter with reports of strong earnings revisions, earnings growth and recovering economic fundamentals seen as the key drivers. We expect the SET Index to be in the range of 850-880 by the end of the year.”
“The easy money was made last year, but 2010 will be a bit more difficult. Markets were significantly undervalued last year, so investors who chose to enter the equity markets one year ago have been handsomely rewarded”, added Mr. Indhavivadhana.
The survey results show that 50% of Thailand investors think that the SET Index will rise in Q2 2010. This compares to 67% of Thailand investors who believed the SET Index would rise in Q4 2009.
“The survey results highlight that investors believe the SET Index will increase by an average of 9.06% during Q2 2010, with 53% of investors also indicating that they will invest in local or global shares. We consider this as an upbeat result. Thailand investors need to understand that they investing offshore is the only way to access the best global opportunities,” added Mr. Indhavivadhana.
“As Thailand represents less than 1% of the global equity market capitalisation, local investors are missing out on 99% of the best global opportunities available. It is incumbent on a global investment manager, like ING, to identify the most promising global themes — for example the digital revolution and ageing populations — and invest in companies that will take advantage of those themes to deliver medium to long capital appreciation. Investors in Thailand need to increase their international exposure in an attempt to get a better return on their investment.”
Strong domestic consumption and “growth optimism” continue to drive investor sentiment in developed and high-growth emerging economies
Investor sentiment in China and India remains the highest among surveyed markets as strong domestic consumption continues to drive their economies. This is despite hints that Chinese investors are concerned about tightening credit and monetary policy by the government as investor sentiment falls 2.5% from Q4 2009.
Sentiment remains high for the developed markets of Hong Kong and Singapore, possibly due to expectations that a global recovery will help spur export and economic growth — currently supported by demand from China — in 2010. Currently, 71% of Hong Kong investors and 80% of Singapore investors believe the economic situation will improve in the next quarter, signalling continued confidence in the local economies.
Sentiment in emerging markets in Southeast Asian (SEA) is mixed; investors in Malaysia and the Philippines are optimistic, while investors have been impacted by political concerns in Indonesia and Thailand (please refer to the Appendix for the market index scores).
U.S. and China economic developments closely monitored by Asian investors; cautious about U.S. recovery
The U.S. and China are seen by 76% and 68% of Asian investors (ex-Japan) respectively as the dual-drivers of the global economy. Investors will likely continue to closely monitor and react to economic developments in the U.S. and China in 2010 as they continue to look for signs that the global economy is on solid footing.
Looking ahead, Asian investors (ex-Japan) appear cautious about a full U.S recovery, with 38% expecting the U.S. economy to recover fully within a year compared to 53% in Q4 2009 and 61% in Q3 2009. In addition, fewer investors expect the U.S. economic situation to improve in the next quarter, with the exception of investors in Hong Kong.
Risk appetite expands among traditionally conservative Thailand investors
While Thailand investors are reasonably risk averse, the longer term pattern appears to be slowly changing. The survey results also highlight a perceived low level of understanding of financial markets and investing with 60%of respondents saying that they have little or no investment experience or somewhat inexperienced and 79% requiring guidance on how to invest or confirmation of their portfolios. Mr Matthew Williams, Head of Strategic Marketing at ING Funds Thailand noted that mutual funds remain one of the easiest ways to have money invested.
"Mutual funds put investors' capital in the hands of dedicated, expert investors, responsible for buying and selling the underlying securities,'' Mr Williams said. “They also remove a lot of administrative tasks experienced by direct share investors. If the fund manager uses a well developed investment process, carefully choosing a portfolio of shares, mutual funds can prove to be an easier solution than investors entering into a number of direct investments themselves,'' he says. “Most individual investors themselves have no investment process, so by relying on a professional fund manager, it takes the guesswork out of investing and can be far less stressful for the investor.''
Mr Williams added that investors need to ask themselves why they are investing and then determine their risk profile accordingly. “Investors need to pay particular attention to their risk appetite. By understanding their risk tolerance they can be better prepared for the ups and downs of the market”. Ninety percent of respondents said they were prepared to lose between 10 and 30% on their investment in order to improve potential returns. This is a surprisingly high number given the conservative nature of Thailand investors, noting that 74% of assets in the Thai mutual fund industry are invested in cash and fixed income.“
Thailand investors appear willing to take a longer term view with their increasingly balanced and diverse investments. The survey results indicated that, 44% of Thailand stock investors plan to increase investments in local stocks in the next quarter. Additionally, current product investors will increase foreign currency (38%), overseas mutual funds and unit trusts (44%), gold (57%) and overseas stocks (42%), indicating a strong confidence in the global recovery.
Inflation a continued risk and interest rate hikes expected in 2010
While a majority of investors in Thailand anticipate that inflation will rise and interest rates will go up, overall concerns about inflation and higher interest rates have actually abated since Q4 2009.
“What concerns us is the effect that inflation would have on Thailand investor’s cash holdings. Thailand investors who remain in cash all year are going to see their purchasing power erode. Inflation is likely to run at 5% and if the average one year bank deposit is approximately 1%this year, the real rate of return is -4%. Even with the SET index at around 750, the dividend yield is 3.5%, which is a better income return than cash and bonds,” commented Mr. Williams.
For an introduction of the ING Investor Dashboard Sentiment Index and the latest detailed (high-resolution) data charts, please visit http://www.ing.asia/investor_dashboard.