CONFIDENCE among Singapore retail investors is at its lowest level since December 2012, but still above neutral, according to a half-yearly survey by JP Morgan Asset Management.

The survey also found a sharp shift towards multi-asset funds as investors deal with multiple uncertainties in the market.

The Investor Confidence index fell eight points to 113 in December 2014 from 121 in June. That was the lowest reading since December 2012, when the index was at 106. But sentiment is still positive, with a reading above 100 indicating that confidence is better than neutral.

Dragging the index lower were less optimistic views on the Singapore equity market and macroeconomic issues.

The percentage of respondents who felt that the Straits Times Index (STI) was unlikely to increase over the next six months almost doubled to 21 per cent, as the percentage of STI bulls fell to 46 per cent from 53 per cent. Investors were also less optimistic about the Singapore and global economies.

But respondents remained just as committed to investing, and were just as likely to increase the amount that they had invested in December compared to six months earlier.

Risk profiles and broad investment strategies were also unchanged, although the survey found a slightly higher preference for capital preservation. Investors were less interested in putting money to work in Singapore over the next six months, however, with 53 per cent saying they would invest in Singapore, compared to 60 per cent in June.

The survey found that among respondents who invested in mutual funds, those who allocated money to multi-asset funds rose to 28 per cent from 20 per cent. JP Morgan Asset Management Singapore chief executive Steven Billiet said market turbulence in the second half of 2014 – the oil slump, uncertainty about interest rates and so on – made it tough to identify a single strategy.

“There’s a lot of things that are happening,” Mr Billiet said. “Now if you’re a bank or a financial adviser, and there is no clear winner there, what are you going to do? You’re definitely going to recommend your clients to be in this type of well-managed, flexible multi-asset type product because that gives you the best chances of having a client that is not in any way over-exposed to something that will possibly get a negative outcome.”

Tai Hui, the firm’s chief market strategist for Asia, said investors will continue to look for yield in the year ahead with interest rates expected to rise only slowly. But high-yield bonds are no longer attractive, and cyclical equities that pay dividends are preferable.

Mr Hui reckoned that the long-term price of oil should be between US$ 70 and US$ 110 per barrel, more than the sub-US$ 50 per barrel lows of recent days. But he cautioned that it could take a long time for oil prices to recover to those levels, and advocated a cautious stance towards that segment.


This article was first published on January 15, 2015.
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