In times like these of volatile markets, who’s got the guts to get in the fray? Apparently, Asians do. A survey by Nielsen shows Asian consumers are more likely to stay invested. What’s more — they are also more likely to put their cash in high-risk assets than their peers in Europe and the U.S.
Nielsen’s Global Consumer Confidence Survey on investment attitudes shows 48 percent of consumers in the Asia Pacific region said they were invested in the markets or used investment services. That compares to just 27 percent in North America, 21 percent in the Middle East and Africa, 16 percent in Europe and 13 percent in Latin America.
Asia’s appetite for risk is also seen in investors’ ability to withstand market volatility. Oliver Rust, the Managing Director of Nielsen says Asian investors tend to trade more aggressively and more frequently than their European counterparts.
More than half (57 percent) of Asia Pacific consumers say they’re willing to accept fluctuations of more than 10 percent. Only half of investors in the U.S. will stomach those swings and just 45 percent in Europe.
Rust says Asian investors tend to have a higher proportion of disposable income allowing them to take more risks.
Disposable incomes in Asia are higher because a growing working population has led to more households with singles, or couples without children in Asia, according to a report by Euromonitor. In fact, it says disposable income per household from 1995 to 2010 grew 13.2 percent in the U.S., while in China it surged 230 percent.
Mark Konyn, Chief Executive of Cathay Conning Asset Management says Asia's risk-taking also has to do with attitudes. “In a Western context, taking risk is often viewed as speculation, rather than investment. In Asia’s high growth economies, investors typically look for higher return opportunities and tend to have shorter time horizons.”
Shan Han, a sales trader at IND-X securities adds that inflation is another factor. He says “higher inflation has also meant that hoarding cash has not been a good strategy for savings because of negative real deposit rates,” prompting Asian consumers to seek higher returns.
Han cites Hong Kong as an example. During most of the 1990s, annual inflation averaged 8.5 percent, while 12-month bank deposit rates averaged 6 percent. That means investors who stashed their cash in the banks were losing 2.5 percent of their savings each year.
Within Asia, Hong Kong consumers tend to be the biggest risk takers. 55 percent of Hong Kong consumers are financial investors, outweighing the global average of 33 percent.
Rust says that has to do with “new money”. “First generation wealth holders tend to focus on capital growth, whereas second or third generation wealth holders tend to focus more on capital preservation,” he says.
That explains why a larger number of Asian consumers pick stocks as opposed to other asset classes such as precious metals and bonds. Almost three-quarters of respondents in Asia picked equities, even though they’re often seen as the riskiest assets class. In North America, only two-thirds picked stocks, and in Europe, less than half did.