Asian investors ready to move to ‘risk-on’ mode in anticipation of rate cuts, survey says

For more than a decade, investors across the Asia-Pacific region have allocated close to half of their assets to cash-related products, but the prospect of a global cycle of interest-rate cutting will soon prompt them to turn towards equities, according to a survey.

Investors in six Asia-Pacific markets – Australia, China, Hong Kong, Japan, Taiwan and Singapore – are gearing up to decrease their cash positions and adopt a more “risk-on” position in asset classes such as equities and bonds, according to a survey published on Monday by Fidelity International. Doing so will allow them to tap opportunities stemming from an expected interest-rate cut by the US Federal Reserve.

The survey of more than 6,000 respondents in late May found that 53 per cent of investors plan to increase their allocation to equities, which historically benefit from lower interest rates, while 64 per cent are looking to allocate money to income-producing assets.

The percentage of investors planning to move to riskier assets was particularly high – around 60 per cent – in Taiwan, Singapore and Australia.

Regardless of their investment objectives or time frame, investors in the region expect an annual return of 8 per cent. Those in Taiwan and Australia are more optimistic, expecting returns of 9.5 per cent and 8.8 per cent, respectively.

“With most investors primarily investing for long-term capital accumulation and expecting an annual rate of return around 8 per cent, looking at options beyond cash is critical,” said Terrence Kan, client portfolio strategist at Fidelity.