The survey showed that the J.P. Morgan Singapore Investor Confidence Index declined by eight points to 113 in December from 121 in June. This is the weakest level since December 2012, when the index was at 106.
However, the index is still in a “confidence zone”, with 100 being neutral.
About 21% of the respondents see a fall in the domestic stock market in the next six months, up from 11% in June.
Fewer investors anticipate a rise in the stock market in the next six months (46% currently compared to 53% in June).
Only 37% of respondents believed the Singapore economy would improve (down from 47% in June).
More investors (23%) expected a decline compared to six months before (13%).
“It is not surprising to see investor confidence somewhat shaken in the last quarter of 2014, given some of the developments affecting financial markets that resulted in greater volatility,” said Steven Billiet, chief executive.
He was referring to the timing of the survey, which was conducted in the last quarter of 2014, when negative developments, including a plunge in oil prices, a slowdown in China’s economy, the collapse of the Russian rouble, and a fear of contagion arising from a Greek exit from the euro had unnerved global financial markets.
Despite the weak outlook, the local market remained the most popular category for investors. However, investors are starting to shy away from investments in the home market with 53% choosing Singapore exposure, down seven points from June.
More respondents have opted to invest in Asia assets (32% in December versus 28% in June) and Asian single country assets (23% compared to 21%).
Shifts to multi-asset
The biggest shift in asset allocation was toward multi-asset funds, which comprise 28% of mutual fund portfolios, up from 20% previously. The top three considerations when investing in multi-asset funds were yield of the fund (58%), flexibility of asset allocation (35%) and volatility of the fund (35%).
“We also observe a shift from pure equity and bond funds to multi-asset funds, affirming our view that investors should reposition their portfolios to mitigate the expected volatility of financial markets and to diversify their risks.
“The trend also suggests that investors are relying more on professional managers to make the decisions on asset allocation,” Billiet said.
The biggest downward shift was in equity funds to 9% from 21% of the portfolio.
Balanced funds comprise over a quarter (31%) of the portfolio, up from 27%.
“The multi-asset income theme is an all-weather strategy from a total return perspective, and should remain as a core holding in a balanced, buy-and-hold portfolio. In addition, a global multi-asset strategy can help investors capture a broad range of opportunities in today’s market.”
Investment strategy stable
The survey found that the risk profile and investment strategy of the sampled 509 investors has remained fairly consistent over the past year, despite the expectations of a bleaker economic and investment climate.
In such a scenario, investors are seeking capital preservation and income-generation strategies.
Among investors who seek to generate a stable income stream, 86%, expect a minimum yield of 4%, with slightly over half desiring 4-6% return.
The top three investment products for stable income are real estate investment trusts or REITs (50%), high dividend stocks (43%) and bonds (33%).
The Investor Confidence Index was introduced in Asia in 2006 and in Singapore in 2011. It provides insights into the confidence, behaviours and the outlook of investors.
