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Global financial crisis a decade ago still casts shadow over Singaporean investors: Survey

SINGAPORE — Singaporeans are among the most conservative in the world in terms of investments, with a majority indicating that their investing decisions are still influenced by the global financial crisis a decade ago, a survey has showed.

An investor sits in front of an electronic board showing stock information at a brokerage house in Nanjing, Jiangsu province, China, December 8, 2015. Photo: Reuters

An investor sits in front of an electronic board showing stock information at a brokerage house in Nanjing, Jiangsu province, China, December 8, 2015. Photo: Reuters

SINGAPORE — Singaporeans are among the most conservative in the world in terms of investments, with a majority indicating that their investing decisions are still influenced by the global financial crisis a decade ago, a survey has showed.

According to the Global Investment Survey 2017 by Legg Mason Global Asset Management released on Friday (June 23), 63 per cent of Singaporeans feel that their investment decisions are still “somewhat” or “strongly” affected by the 2007/2008 financial crisis. This is the highest in Asia, surpassing Hong Kong (61 per cent), Taiwan (57 per cent) and China (53 per cent), and well above the global average of 56 per cent.

“The global financial crisis and its impact on the Singapore economy are still relatively fresh in many people’s minds. The island nation is highly integrated with the global economy, so the local economy and capital markets were strongly impacted, hitting many households directly in the wallet,” said Mr Lennie Lim, Legg Mason’s Singapore-based Regional Head for Asia.

As markets worldwide were rocked by the global financial crisis spawned largely by the United States sub-prime mortgage fiasco, the benchmark Straits Times Index (STI) slumped from its closing high of 3,876 points in October 2007 to below 1,600 by February 2009. The STI closed at 3,209 on Friday, amounting to a 11.4 per cent gain in the year to date, Bloomberg data showed.

The hangover from the global financial crisis joins economic instability around the world (64 per cent), inflation (61 per cent) and unemployment (60 per cent) as main investment concerns for Singaporeans, the Legg Mason Global Asset Management survey showed. While Singapore’s jobless rate remains low compared with much of the developed world, concern over unemployment is significantly higher among Singaporeans than the Asian ex-Japan average of 40 per cent, the survey showed.

“It may be assumed that anxiety over global economic instability is the root of concern over unemployment in Singapore. However, it is more likely that a 2016 spike in Singapore’s resident unemployment rate to the highest level since 2010 is the main reason, as other Asia markets with strong global economic ties do not show a similar pattern,” said Mr Lim.

The annual average resident unemployment rate rose from 2.8 per cent in 2015 to 3 per cent last year, the highest since 2010, final data from the Manpower of Ministry showed in March.

The concerns combine to make Singapore investors less optimistic than many of their global peers in terms of the investment outlook for the coming year. They report net optimism of just 9 per cent, significantly lower than the Asia ex-Japan average of 18 per cent and the global average of 20 per cent, the survey showed. The net optimism reading is derived by subtracting the percentage of investors who are “not that” and “not at all” optimistic from the percentage of investors who are “very” and “somewhat” optimistic.

This relative lack of optimism is reflected in asset allocation among Singapore investors, whose portfolios show an overwhelming preference for defensive assets, which account for about 68 per cent of their self-reported allocations. This includes 38.5 per cent held in cash, 16.8 per cent in fixed income, 8.7 per cent in investment real estate and 3.8 per cent in gold and precious metals.

Cash remains king across Asia, which leads the globe in the allocation of these holdings. Singapore trails only Japan (53.4 per cent) and Hong Kong (39.7 per cent), but is well ahead of the global average of 32.7 per cent.

“The preference for holding cash in Asia is likely a holdover from the days of high interest rates in the region, when cash served a stabilising asset amid periods of volatility. However, with currently low interest rates, cash is more likely to contribute negative real returns to a portfolio,” said Mr Ajay Dayal, Investment Director at Legg Mason Global Asset Management.

“We see an opportunity for Singaporeans, who are generally knowledgeable about investments and investment markets, to potentially boost their investment returns by shifting a portion of their cash holdings to higher risk and potentially higher return assets such as equities,” he added.

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