Asia’s millennial investors prefer property and cash, just like their parents, says Manulife survey

PUBLISHED : Tuesday, 21 February, 2017, 5:32pm
UPDATED : Tuesday, 21 February, 2017, 11:01pm

Millennial investors in Asia are more willing than their parents to borrow money for spending, but in terms of investment their behaviour is similar to the older generation in that they invest mainly in property and like to hold cash, according to a survey by Manulife Asset Management.

The survey of eight Asian markets – Hong Kong, China, Singapore, Indonesia, Philippines, Malaysia, Thailand and Taiwan – drew 4,000 respondents, including 1,400 millennials, and was conducted during September and October last year.

Property and cash are the major investments undertaken by the 18 to 34 year old group of millennials when planning their retirement, which means their investment decisions aren’t that different from their parents, according Michael Dommermuth, head of wealth and asset management, Asia region, for Manulife Asset Management.

“Millennial investors grew up in an era where they witnessed their parents having earned a lot from their property. It is only natural that they follow the same pattern,” Dommermuth said in an interview with the South China Morning Post.

The survey showed that 51 per cent of millennial investors across Asia want to buy property in their local market in the short term, higher than 57 per cent for investors of all ages. Among the different markets, Indonesia ranked top with 82 per cent of millennial investors wanting to buy property, followed by Taiwan with 65 per cent, Philippines at 59 per cent, Hong Kong at 53 per cent and mainland China at 44 per cent.

While previous generations relied heavily on real estate for their retirement fund, economics and demographics mean that today’s millennials need to take a different approach
Michael Dommermuth, Manulife Asset Management

Dommermuth said millennial investors need to be aware that Asian property markets in the following years may not repeat the same high growth of the past decade.

“Many Asian markets have an ageing population and an economic slowdown. While previous generations relied heavily on real estate for their retirement fund, economics and demographics mean that today’s millennials need to take a different approach,” he said.

“Millennials who invest in emerging Asian countries such as Indonesia will likely fare better than those who buy a home in maturing Asia such as Hong Kong or Singapore, where slowing growth and ageing populations can dampen real estate markets,” he said.

Besides property, millennials also like to hold cash, and across Asia 50 per cent of their non-property investments are bank deposits, compared with about 20 per cent for millennial bank deposits in the US and other OECD countries.

In Asia, about 20 per cent of investments are in insurance products, 15 to 20 per cent are in stocks while the rest are in mutual funds. In the US and OECD markets, millennial investors put about 15 per cent of their wealth into mutual funds and the rest in insurance and pension products.

“Millennial investors need to consider taking more risks in their investment portfolios as bank deposits are not going to offer any return during a low interest rate environment,” Dommermuth said.

Even with US interest rates expected to increase, he said it would still take a long time for the current near zero interest rate environment to change to a high interest rate era, which means bank deposits won’t deliver much in the way of return to investors.

He urged investors to think of investing more in stocks and other types of mutual funds.

“Investors should diversify their portfolio and invest in different products and different markets so as to spread the risk,” Dommermuth said.