Manulife: Investor sentiment on the rise

Sentiment was positive in all markets except Hong Kong and rising in most – dramatically so in Japan, an apparent response to “Abenomics”, Prime Minister Shinzo Abe’s bold plan to boost the economy. 

The Manulife ISI findings show a clear majority of investors in both Asia and Canada expect to be in an improved financial position two years from now, both up since their previous findings earlier this year. The respective figure for the United States was unchanged at around half.

“These Manulife ISI findings point to Asia investors warming to signs of recovery in the real economy, and that’s also reflected in our findings from North America. But many aren’t yet ready to invest further and most are holding on to too much cash, thereby effectively losing money,” said Robert Cook, president and chief executive of Manulife Asia. 

Despite the positive findings overall, there was weak linkage between sentiment and planned investment in Asia. For example, in Japan investors were positive about stocks but the number planning actual investments was lower than in mainland China and Taiwan, where sentiment was lower.

The Manulife ISI also points to a “barbell” approach to investing in developed Asia markets, with investors prioritising cash and stocks. Overall, these two asset classes were the top two product types owned and the top two financial holdings in terms of investors’ assets (excluding primary residence). 

The Manulife ISI also highlighted that Asia investors were holding a lot of cash. Forty per cent of respondents’ non-primary resident assets were held in cash – more than double the next-highest asset types, insurance and stocks. 

The Manulife ISI indicates Asia investors expect unrealistically high returns. Half of those surveyed expect average annual returns on stocks of around 20 per cent – double average annual returns over the past 15 years. 

“Investors’ equity-market expectations certainly seem to be on the high side,’’ said Ronald Chan, head of equity for Asia at Manulife Asset Management. 

Global markets, including in the Asia-Pacific region, have become more volatile of late given the tapering of quantitative easing in the US and concerns around China’s economic growth. Although the near-term direction of the broad markets will likely be dictated by macroeconomic announcements, fundamentals have improved year on year and there are abundant opportunities in the equity markets at the sector and stock level for investors.

The positive response to Abenomics evident in the Manulife ISI chimes with a new study, “The Outlook for Abenomics: Implications for Financial Markets”, by Manulife Asset Management. The report suggests Abenomics is likely to succeed, albeit within a range of scenarios affected by such factors as upcoming Upper House elections and a new consumption tax in Japan and US Federal Reserve actions.