A new survey by Manulife Asset Management showed that one-fifth (20%) of the respondents prefer cash as their most favoured asset class, second only to the top choice of equities (23%).
Investments in property were also preferred by a similar number of respondents (20%), but this was led by markets such as the Philippines and Indonesia, where equity investments have yet not taken off.
Volatile markets and returns?
In terms of market performance, Asian retail investors are expecting an average return of 10% across regional markets.
The market with the highest return expectations (14.5%) is Indonesia.
China is seen delievering an 11.4% return, markedly lower than the 37% surge seen in the Shanghai Composite Index last year. Japan was at the lower end of return expectations with 7.4% expected.
According to the survey findings, the investor tendency to hold cash despite optimistic market expectations reflects the difficulties they face in planning asset allocation strategies.
“Closer inspection of what Asian investors intend to invest in over the next six months, however, raises questions over their ability to meet their performance targets, as cash remains the most-favoured asset class and the top destination for increased allocation,” according to the survey report.
Asians are already overweight cash, at 37% of their portfolios (excluding primary residence) by usual asset allocation standards, the report said.
"Many individuals are finding it difficult to plan for the long term in the prevailing market context, but we feel that retreating to cash is not the solution, especially when the low interest environment means that cash won't yield returns,” said Peter Warnes, international head of Manulife's portfolio solutions group.
China, Hong Kong and Japan were the markets where investors held neutral to negative views on cash. Instead, investors in these markets are most bullish on equities, with sentiment towards stocks in China at 58 points, Japan at 37 points and Hong Kong at 11 points.
Index sentiments slip
According to Manulife, the crosscurrent of macro-economic developments, ranging from monetary easing and stimulus in Mainland China and Japan, to the collapse in oil price has “heavily” influenced retail investor sentiment in the fourth quarter of 2014.
The overall Manulife Investor Sentiment Index for the region declined by 2 points to 26. In Indonesia, the sentiment dropped by 14 points to 50, Malaysia fell by 8 points to 47, and Hong Kong declined by 5 points to -10.
Mainland China and Japan were the two markets that registered a rise in the index.
Hong Kong sank on investors' gloomy opinion of the real estate market. Indonesia fell due to expected inflation pressure and sentiment on Malaysia, being a net oil exporter, was hit by the collapse in oil prices.
Manulife’s Investor Sentiment Index (ISI) in Asia is a quarterly survey measuring and tracking investors’ views across eight markets in the region.
The index is based on 500 interviews in each market of Hong Kong, China, Taiwan, Japan, and Singapore, Malaysia, Indonesia and the Philippines.