Singapore investors shun equities as geopolitical tensions escalate: survey

They’re turning to fixed income and mutual funds.

Escalating global tensions are driving domestic investors from equities. Manulife’s Investor Sentiment Index revealed that investors are increasingly turning to fixed income and mutual funds due to their perceived quality and stability.

Respondents cited market stability and higher returns in fixed income as the main reasons for their increased optimism towards this asset class.

There was also increased interest in mutual funds, with low interest rates and the improving employment situation considered key reasons for favoring this type of investment.

“The survey revealed a significant boost in sentiment towards fixed income markets in the second quarter on the back of lower yields in government bonds which resulted from a flight to quality amid uncertainty arising from the situation in Ukraine and geopolitical tension elsewhere,” said Jill Smith, Senior Managing Director with Manulife Asset Management (Singapore).

“While sentiment was buoyant towards fixed income, the survey showed that investors were less optimistic about equities, however, we expect equities to enjoy more favor going forward. In general we are optimistic about equities in developed Asian markets. Furthermore, in Singapore, listed companies should continue to benefit from increased economic activity overseas.” she added.

The improvement in overall sentiment during the quarter took Singapore above China and Japan, and pulled it even further ahead of Taiwan and Hong Kong. Only in Indonesia, Malaysia and the Philippines are investors more optimistic, the survey showed.

Here's more from Manulife:

Singapore investors’ more upbeat investment sentiment extends to Singapore’s economic growth outlook. Over the next two years, they expect that only China will have faster economic growth. Just over half said they think China will rank first or second for economic growth, India ranks second on 26 percent, followed by Singapore on 17 percent. Some way behind is Japan on 7 percent.

Singapore investors are also very optimistic about investing domestically, with sentiment towards Singapore on 28 points, just behind China on 33 points, but well ahead of Japan on 12 points.

On a regional basis, Singapore investors show a preference for emerging Asian markets (38 points) as a place to invest compared to developed markets in Asia (31 points). They show much less interest in investing in North America (9 points), and emerging and developed European markets (both 5 points), while sentiment towards investing in the Middle East and North Africa is the weakest (at 3 points).