Asian investors want to take on more risk, survey says, but their portfolios show otherwise

  • Investors in Asia tied with their European counterparts for the lowest proportion of optimistic investors, a recent survey found
  • Even though investors in Asia indicated they wanted to increase their exposure to risk, their portfolios reflected otherwise

Even though growth prospects for Asia top global averages, investors in the region tied with their peers in Europe for having the lowest proportion of investment optimism, according to a recent survey.

Just 56 percent of respondents in Asia indicated they were at least "somewhat optimistic" when it came to their investment outlook this year ー compared to the global average of 60 percent ー asset management firm Legg Mason found in its Global Investment Survey. Investors in Europe expressed the same level of investment optimism.

The divergence in optimism within Asia, however, was significant.

While 80 percent of investors in China indicated they were optimistic about investing this year, just 40 percent of those in Japan said the same — the lowest proportion among the countries polled. Net investment optimism was in negative territory in Hong Kong and Japan.

Men look an electronic board showing stock information at a brokerage house in Beijing, China, January 5, 2016.
Kim Kyung-Hoon | Reuters
Men look an electronic board showing stock information at a brokerage house in Beijing, China, January 5, 2016.

Although the Asian growth narrative was a positive for the region, investors were first influenced by the primary environment they lived in, explained Legg Mason Global Asset Management Investment Director Ajay Dayal. He pointed to political uncertainty over China's influence and incoming Chief Executive Carrie Lam as reasons for the doubt plaguing Hong Kong investors.

The firm's survey was conducted between January and February this year and considered responses from 15,300 individuals across 17 countries. Responses for Asia Pacific were collected from Hong Kong, Singapore, Japan, Taiwan, China and Australia.

Another surprising find: Fewer investors in the region indicated they were conservative than their global counterparts — although their portfolio allocations suggested otherwise.

Close to half of investors in Asia said they wanted to take on more risk, but cash and other defensive assets continued to make up a significant proportion of investors' portfolios, the survey found. In Taiwan and Hong Kong, cash made up the largest component of asset allocation among respondents.

"We found that there's a big gap between what people want as an expected return, which is about 8.25 percent, and what they're actually receiving across Asia … (which is) about 5.8 percent. That's a 2.5 percent gap in terms of annualized returns," Dayal said.

One reason for the disparity was the "natural dichotomy" between how investors saw themselves and how they wanted to grow returns, Dayal explained.

"The preference for holding cash in Asia is likely a holdover from the days of high interest rates in the region, when cash served as a stabilizing asset," he said in a statement, adding that in the current low-rates environment, cash was likely to contribute negative real returns.

The survey also found that investors in the region believed that the Federal Reserve and U.S. foreign policy were the biggest risks in the markets.