Survey: China’s affluent see offshore markets as confusing

Added 27th May 2016

Only 8% of the mainland's emerging affluent have assets overseas, and the majority said they are not familiar with foreign markets.

Survey: China’s affluent see offshore markets as confusing

The survey report, by Shanghai Advanced Institute of Finance and Charles Schwab, polled 450 investors who have annual after-tax income between RMB 125,000-1m ($20,000-152,500), from four cities (Shanghai, Beijing, Guangzhou and Hangzhou) at the end of last year.

“This group sees overseas markets as confusing and risky, and they lack the expertise to navigate them alone,” the report noted. Of the 92% who have not invested overseas, only 35% expressed interest in offshore investments.

Other barriers include foreign exchange risks, little knowledge about information on investing overseas and restrictions on currency convertibility, the results showed.

“China’s affluent investors typically desire stability,” the report noted, as the investors hold 45% of their total investable assets (excluding real estate) in cash, and only 20% in stocks.

More than half (54%) of investors said they prefer investments with a lower but guaranteed return, while nearly three quarters said market volatility is a key obstacle to investing.

"China’s affluent investors typically desire stability,” the report noted, as the investors hold 45% of their total investable assets (excluding real estate) in cash, and only 20% in stocks"

In a 2014 survey done by Charles Schwab and Tsinghua University, investors’ holdings in real estate were twice the liquid and investable assets.

As for their investment goals, 45% said it’s for purposes such as retirement or children’s education. Another 42% meant to improve their living standard.

Only 13% said they invest for a quick profit or to make a major purchase, “contrary to the widespread characterisation of emerging affluent Chinese as short-term schemers,” it said.

The results also suggested that there is a “mismatch between client needs and services”.

Only about one-third of respondents said they would seek professional investment advice, and among them only 23% described the advisor as “caring about my financial future and investment goals".

When making investment decisions, 64% named friends and family as an important information source, followed by financial website information (50%) and mass news media (48%).

Only 15% said to be professional investment advisors from financial institutions.

The report explained that domestic wealth management firms frequently offer mass-marketed products instead of personally-tailored investment plans, while the wealth management products generally lack transparency with little detailed information.

It recommended that industry players should provide advice and more investor education instead of just pushing products.

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