Investors bide their time
Hong Kong investors are well ahead of their counterparts in the region and are always considered bold in their decisions.
A survey by an international investment bank shows that Hong Kong investors are waiting for the right time to put their money in equities.
Royal Skandia bank says an analysis of its customers' investment behaviour shows Hong Kong investors chose to safeguard their investments by favouring cash over all other asset classes last year, suggesting there is money waiting to be switched into equity funds as confidence returns.
Cash accounted for almost 70 per cent of all money invested in Royal Skandia's investment products in Hong Kong during last year, with a further 16 per cent going into global fixed interest funds.
For those who chose to place their money in these two sectors, this decision may have paid off as the average performance of these asset classes remained positive, unlike any other asset class in the analysis.
The investment bank's figures show a significant proportion of savings sitting in cash and fixed interest while investors wait for the 'right' signals from the markets in order to move into equities, or other asset classes, and join the rally when it happens.
While commodities ended up being the third most popular asset class, it took in a mere 5 per cent of investment with the remainder being fairly evenly spread across a selection of specialist equity sectors, the bank's analysis shows.
In terms of investment returns, the next best performing funds behind cash and fixed interest were British property equity funds, although still falling by more than 1.5 per cent, followed by cautious and North American equity funds, with both sectors dropping by more than 4 per cent each. The worst performers, with losses above 30 per cent, were emerging Europe and Russian equity funds, which suffered to the greatest extent as a result of the euro zone debt crisis.
Royal Skandia says that looking at withdrawals, more than a quarter of the money removed in 2011 was from Hong Kong and Chinese equity funds. The disappointing performance and heightened volatility of these funds, together with a fall in investment risk appetite due to global contagion fears, were contributing factors behind such dramatic changes in Hong Kong investors' savings behaviour.
Mixed asset funds also proved to be among the least attractive last year, with more than a third of Hong Kong investors choosing to move their savings out of these funds.
More than 15 per cent exited Latin American and BRIC equities, a decision likely to have been influenced by the performance of emerging market equities, which fell by more than 18 per cent in 2011; these also proved the most volatile sectors for investments last year.