But whereas American and Australian savers put their assets to work in a range of investment products, Asian savers continue to keep the bulk of their assets in cash and bank deposits.

In the most developed economy, that of the US, cash and deposits comprise just 18.2 per cent of household assets, versus 81.8 per cent for investments; in Australia the split is 29.6 per cent cash versus 70.4 per cent investments; followed by 51.9 per cent versus 48.1 per cent in Asia 4; and 70.9 per cent in cash and deposits versus just 29.1 per cent in investments in the economies of Asia 5.

'Investors in [Asia], need to diversify their investment portfolios,' said Vineet Vohra, regional director of Citibank's investment business in Asia-Pacific. 'We continue to advise our clients to include hedge funds, mutual funds, structured products and other professionally managed vehicles in their portfolio.'

In times of high inflation, Mr Vohra said, large cash balances could lose value and savers could also lose out on the enhanced returns available on capital markets as the global economy recovered.

'[Citibank has] got it right,' said Francis Lun, general manager of Fulbright Securities in Hong Kong.

'As a rule, Asian savers don't put their excess money into a mutual fund or a unit trust to invest for their retirement.

'They are 'super safe' and prefer to keep their money with banks - which becomes an inefficient circulation of financial resources with the society.'

But Mr Lun, whose firm is in the top 15 to 65 Hong Kong brokerages and has built a specialist niche catering to small retail investors, said the preference shown by savers for cash was not entirely the result of unreflective conservatism.

'In the US, or Europe, where more people put their money into stocks or mutual funds - which is a huge industry in the US in particular - there are tax reasons for it. They are encouraged to invest for retirement because they get a tax benefit.

'But in Hong Kong, at least, they don't get a tax benefit because the tax rate is already so low.'

Asian savers are also not exposed to investment markets to the same degree as their western counterparts since the region's financial services industry is not as developed and, in some cases, those that are tempted into investing have witnessed funds losing money - even in booming markets.

Asian conservatism should also be understood in the context of blows to confidence delivered by the Asian financial crisis of 1997-98 and the collapse of property values and equity prices that followed, said Derek Young, chief executive of Ipac Financial Planning HK.

With 30,000 customers and assets under management of US$7.5 million, Ipac claims to be the largest independent financial planning group in the region.

'Asian investors are conservative but they have been through a hell of a time,' Mr Young said.

Market research commissioned by the group had identified a new category of consumers called 'retreated investors', he said, describing them as those who had abandoned investment markets as a result of the successive crises of confidence in the region.

'Our market survey shows that about 30 per cent of small investors are now in that category,' Mr Young said.

But he added that the education of consumers by bodies such as the Institute of Financial Planners of Hong Kong as well as the Securities and Futures Commission would wean savers back to investment markets.

'People will recognise that when they reach retirement, they will not have a pay cheque for up to 40 years, perhaps. That means they must invest in areas that are going to grow sustainably and a lot of effort is going into advising them to invest and to stay invested.'

Sally Wong, executive director of the Hong Kong Investment Funds Association, said it was fair to note that Asian investors were cash-rich and under-invested - but this was changing.

'Our surveys show that in Hong Kong, about 15 per cent of households are invested in mutual funds, which compares with a penetration rate of about 50 per cent in the United States.

'But in 1997, the penetration rate in Hong Kong was just 3.5 per cent and by 2000 it had doubled to just over 7 per cent - so there is a steady increase,' she said.

The higher penetration rate in the US could be ascribed to the 401k system, which provides tax incentives for those investing for retirement.

'If investment in Hong Kong is to take off, a key catalyst would be this sort of incentive. It will benefit the mutual fund industry but from the government point of view, it would also be an important way to develop the 'three pillar' model ... namely social security, occupation-related savings and voluntary individual savings,' Ms Wong said.

'If the government really wants ... people to prepare for retirement, it must increase incentives for those second and third pillars.'