Published April 16, 2008

Dent in S'pore investor optimism

An ING Asia-Pacific survey shows investor sentiment dived 35% in the first quarter, the biggest fall among 13 Asian markets, reports CHOW PENN NEE

INVESTOR sentiment in Singapore is one of the least optimistic in Asia, a survey says. Singapore also experienced the biggest drop in investor sentiment from the fourth quarter of last year to the first quarter of this year.

According to a survey of investor beliefs and outlook conducted by banking group ING Asia-Pacific, Singapore's investor sentiment fell 35 per cent, the largest decline of 13 countries in Asia. Investor sentiment in Singapore stood at 88 for Q1 2008, down from 136 in Q4 2007, and a further dip from 141 in Q3 2007. This compares with 107 for Hong Kong and 96 for Korea in Q1 2008.

Singapore came in third in terms of being least optimistic, beaten only by Taiwan and Japan - which was the least optimistic.

ING said that there was a further decline in investor sentiment in Asia, reinforcing the reality that the region is not insulated from the global market uncertainty.

The sub-prime crisis and credit crunch remain key areas of concern in this part of the world, it added.

'Investors in Singapore are more actively invested in global equity funds and, therefore, it is not surprising that the volatility in the global market has some impact on Singapore,' explained Hou Wey Fook, chief investment officer, ING Private Banking, Asia. 'The reality is that markets around the world are linked and Asia has not been spared the effects of the credit crunch and a slowdown in the US economy.'

Singapore's open economy and export-driven market leave it dependent on what happens in the US. 'Singapore is probably the most dependent on global developments,' noted David Cohen, an economist at Action Economics. 'As a tiny city state, most of the activity here is trading.'

He noted that Singapore is more vulnerable than Hong Kong - another open economy, but with the advantage of having China as a hinterland.

The less buoyant sentiment in some markets was, however, tempered by optimism in fast-growing markets like China and India. These two countries reflected the highest levels of investor optimism in Asia, with investor sentiment index scores of 136 and 168 respectively.

Falling pan-Asia sentiment

Overall, the pan-Asia sentiment index still fell to 125 for Q1 2008 from 135 for Q4 2007.

The other countries included in the pan-Asian survey are China, India, Indonesia, Malaysia, the Philippines, Taiwan and Thailand. Japan, Australia and New Zealand were surveyed but not included in the Pan-Asian index.

Singapore investors remained less optimistic about the longer term than their Asian counterparts.

Slightly over a quarter of respondents in Singapore indicated that they have a positive outlook of the economy in Q2 2008, compared with nearly half the respondents in Asia (ex-Japan).

Slightly less than a third of respondents here also said that they expect their state of personal financial situation to improve in Q2 2008 compared with more than half of those surveyed in Asia (ex-Japan).

The souring of investor sentiment, in turn, has a bearing on investment decisions and investment products.

The survey showed that a majority 93 per cent of investors in Singapore expected the sub-prime crisis to impact their investment decisions in Q2 2008.

Singapore investors also did not expect the economic climate to pick up soon, with 82 per cent expecting the US economy to worsen in Q2 2008 in view of global market uncertainties.

More than a third of respondents here believed that property prices in Singapore will drop and about one-fourth of these investors expected it to drop by 5 to 7.5 per cent in the next three months, said the survey.

Singapore investors were opting to invest closer to home, with 84 per cent favouring local stocks and cash deposits. Almost half of those surveyed were invested in local mutual or managed funds and unit trusts.

'It's premature to anticipate the worst is over, although we expect Asia to be resilient,' commented Mr Hou. 'In the longer term, Asia's economies will remain robust, driven by inter-regional trade and domestic demand.'

He said that gross domestic product (GDP) growth here will likely be impacted marginally. 'We expect Asia to continue to post strong GDP growth between 3 and 9 per cent across the region for 2008, with Singapore growing 5.3 per cent.'