Retail investors here remain cautiously confident amid growing concerns about higher interest rates and a slowdown in China's economy, according to a JP Morgan Asset Management survey.
The Singapore Investor Confidence Index Poll, meant to reflect the outlook and behaviour of experienced investors, stayed stable at 121 last month, from 122 a year ago. An index level of 100 is neutral, while 200 indicates a very positive outlook.
But the proportion of risk takers fell by 5 percentage points to 46 per cent, while that of investors who are either maintaining or cutting back their investments for the next six months has jumped to 54 per cent, from 49 per cent.
"While a sharp move up in US yields during 2014 now looks less likely than it did six months ago, the Fed will eventually normalise monetary policy as the US expansion gains pace.
"Singapore investors should recognise this and start positioning their portfolio in anticipation of the Fed raising rates some time next year," Mr Brian Tan, head of fund sales for JP Morgan Asset Management in Singapore, said.
"While it is certainly easy for investors to be concerned about China, selectivity is key as there are certainly opportunities to tap into China's domestic consumption power, and benefit from structural reform measures.
"More importantly, investors should consider that emerging markets equities (including China) are essentially cheap relative to their own history and are now at the biggest discount since 2006 relative to developed markets," he noted.
Forty-seven per cent of the 502 investors polled think that the Singapore economy is likely to improve, compared with 51 per cent half a year ago. Among those bearish on the local economy, 12 per cent cited the slowdown in China as a factor, up from just 3 per cent six months ago.
Among those planning to cut back their investment in the next six months, 33 per cent cited possible higher interest rates, in the wake of stronger job data in the United States and Britain, compared with only 10 per cent six months ago.
Even so, the number of those considering investing in Singapore rose to 60 per cent from 57 per cent in December, while those eyeing global markets made up 21 per cent, up four percentage points.
Most investors said they invested mainly for capital growth (44 per cent), followed by the need to generate a stable income stream (25 per cent). Of those who invested for stable income, most expected a yield of at least 4 per cent. The trend among investors has been a flight to high dividend stocks, Reits and bonds, particularly Singapore investment grade bonds, for income.
More than half of the investors polled are now expecting the Singdollar to remain stable against the US dollar in the next six months. Fifty-seven per cent of investors expect the current inflation rate to remain unchanged in the next six months, up from 47 per cent in December.
This article was first published on July 20, 2014.
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