Market confidence at an all-time low in Singapore

Gold and cash remain the top choice among investors while equities and shares are the least favoured asset classes.

According to a release, the latest Friends Provident International Investor Attitudes report shows confidence in the current market and its prospects are at an all-time low in Singapore, dropping four points to 12.

The significant drop captured in the Friends Investor Attitudes Index, can be attributed to the global financial unrest, in particular the European sovereign debt crisis, which has negatively impacted on investors across all markets.

The latest report, the seventh in the series, surveyed 1002 people in Singapore from 9 – 20 January 2012. The results show a clear divergence in the popularity of asset classes, with gold and cash remaining the preferred choices among investors while equities and shares have become the least favoured category.

Chris Gill, Principal Officer and General Manager, Southeast Asia at Friends Provident International said: “There is now a very obvious divide among asset classes with gold and cash
more than 20 points ahead of any other asset class in the favourability rankings of investors.”

Cash is the only asset class to record an improved score in this research wave, while gold bullion is also still very much in favour despite dropping back from its high of 33 points in Q2 2011.

The decline in attitudes towards money and currency markets could be a direct result of the debt crisis in Europe according to Mr. Gill.

“One in four respondents to our survey believes the crisis in Europe will last at least another one to two years. This may explain why more investors are now prepared to adopt a medium term strategy when considering their investment time horizon.”

Mostly male and aspiring affluent respondents are of this opinion, however the ‘up and coming’ category of investors is more optimistic, believing the crisis will be over within six months to one year.

In this research wave, the majority of investors prefer a mix of different investment terms and are taking a balanced approach to their portfolios. However the three to five year investment time horizon has seen an increase from 9% to 12% compared to the last wave.

Although there has been a slight movement towards a more risk-averse strategy, the majority of respondents prefer to remain with a balanced approach in line with the findings of previous waves.

Mr. Gill continued: “Despite the volatile global market conditions, there appears to be a tactical, shorter term approach being adopted alongside a longer term strategic plan. We are not seeing a dramatic shift in risk appetite but rather a change in where investors are choosing to invest.”

When selecting investment funds, risk rating and past performance remain the key factors being taken into consideration, with females, single and affluent respondents focusing on the risk rating more than other factors.

The volatility of funds and fund charges are also impacting investment choices, with single and affluent respondents more concerned about fund charges when selecting their investment funds than other demographics.

Investors also appear to be using different channels to obtain their financial information; in particular there has been an increase in the use of bank advisers and financial company websites in this wave.

The overall investment outlook continues to be negative, with many respondents believing the market is in a worse position than six months ago and that the situation will be no better in six months time.

Media coverage of the slow economic growth forecast for 2012 could have affected this along with a shrinking manufacturing sector in Singapore and the ongoing European debt crisis.