Singapore investor sentiment rose in the second quarter of 2014 to its highest level since the launch of the Manulife Investor Sentiment Index, driven primarily by a more positive view of the property, fixed income and mutual fund sectors, according to thefindings from Manulife.
Sentiment among Singapore investors rose by four points in the second quarter to 15, the highest level since the survey was launched in the first quarter of 2013. Improved sentiment towards property was the main reason, with sentiment towards primary residence up 10 points to 23 while investment property climbed out of negative territory by 13 points to 5.
"Clearly Singapore investors have recently regained quite a bit of confidence but it’s important not to lose sight of the fundamentals and still take a measured approach. It’s crucial to actively manage a diversified portfolio to guard against risk and maximize returns," according to Naveed Irshad, President and CEO of Manulife Singapore.
The proportion of respondents who think it is a good time to invest in their own home rose to 40 percent in the second quarter (from 31 percent in the second quarter). Low interest rates, market stability and, importantly, the view that property prices have corrected to an attractive entry level for investment were key. Private residential property prices fell 1.0 percent in the second quarter of 2014, the third straight quarter of price declines.
Of the other asset classes in the index, fixed income (up 4 to 16) and mutual funds (up 2 to 13) also climbed to their highest levels since the survey began. Equities on the other hand showed a small decline (down 3 to 16).
Market Stability and Better Returns Attract Investors to Fixed Income and Mutual Funds
Singapore investors cited market stability and higher returns in fixed income as the main reasons for their increased optimism towards this asset class. There was also increased interest in mutual funds, with low interest rates and the improving employment situation considered key reasons for favoring this type of investment.
"The survey revealed a significant boost in sentiment towards fixed income markets in the second quarter on the back of lower yields in government bonds which resulted from a flight to quality amid uncertainty arising from the situation in Ukraine and geopolitical tension elsewhere," said Jill Smith, Senior Managing Director with Manulife Asset Management (Singapore).
"While sentiment was buoyant towards fixed income, the survey showed that investors were less optimistic about equities, however, we expect equities to enjoy more favor going forward. In general we are optimistic about equities in developed Asian markets," Ms. Smith added. "Furthermore, in Singapore, listed companies should continue to benefit from increased economic activity overseas."
The improvement in overall sentiment during the quarter took Singapore above mainland China and Japan, and pulled it even further ahead of Taiwan and Hong Kong. Only in Indonesia, Malaysia and the Philippines are investors more optimistic, the survey showed.
Singaporeans Place Domestic Economy Third in the Growth Expectation Stakes
Singapore investors’ more upbeat investment sentiment extends to Singapore’s economic growth outlook. Over the next two years, they expect that only China will have faster economic growth. Just over half said they think China will rank first or second for economic growth, India ranks second on 26 percent, followed by Singapore on 17 percent. Some way behind is Japan on 7 percent.
"We see the potential for positive economic growth in Singapore, China and India. Singapore’s economy is highly integrated into the global economy and in particular should continue to benefit from economic growth in other developed countries," said Smith.
"Meanwhile, we expect China’s full year GDP growth to be close to the government’s official 7.5 percent target for 2014. This is based on higher demand from Western markets plus the feed through from economic stimulus measures implemented in the first half. India’s new government is widely expected to implement economic reforms which will lay a foundation for renewed long-term growth."
Singapore investors are also very optimistic about investing domestically, with sentiment towards Singapore on 28 points, just behind China on 33 points, but well ahead of Japan on 12 points.
On a regional basis, Singapore investors show a preference for emerging Asian markets (38 points) as a place to invest compared to developed markets in Asia (31 points). They show much less interest in investing in North America (9 points), and emerging and developed European markets (both 5 points), while sentiment towards investing in the Middle East and North Africa is the weakest (at 3 points).