• Investor preferences shifting from cash and property to equities and mutual funds
  • China investors rely on skill, not luck, for investment decision making
  • Investors expect returns of 11.4% in 2015
Beijing - China investors are increasingly open to sophisticated and diverse investment alternatives but are keeping their cool by maintaining a moderated and skills-based investment approach, according to new research by Manulife.*

Recent improvements in China investor sentiment - which leapt from 15 to an all-time high of 29 points in the fourth quarter of 2014, taking China above the Asia average (26 points in Q4) for the first time - were driven by a jump in optimism towards equities and mutual funds. Both are now at their highest level ever, at 58 points and 48 points respectively, indicating that investors think it is a very good time to invest in these asset classes. By comparison, investors are neutral towards investing in the more traditional asset classes of cash and investment property, which both sit at just 3 points. At this level cash is now at its lowest level ever in China, and significantly below the average for Asia of 33 points. This lack of optimism in investment property is reflected in investors' actual portfolios, with real estate investment dropping from 9% to 5% of total portfolios (excluding own home) in the last quarter of the year.

Looking to the future, China investors tip equities to be the best performing asset class in 2015. Their investment intentions for the first six months of the year reflect this view, with 50% saying they will buy more equities (the highest such intention in the region), followed by equity-linked products including mutual funds and exchange traded funds. They are much less positive about and less likely to invest in cash and property than their counterparts elsewhere in Asia.

"We are seeing an increasingly savvy investor in China" said Guy Mills, President and CEO of Manulife-Sinochem Insurance, "Investors are turning to equities and other capital market based investment opportunities in much higher numbers than we have seen in the past. This trend is indicative of the increasing investor sophistication as well as the opening up and maturing of the China market."

Skill, not luck, the secret to investors' success
Nearly two thirds of China investors report being happy with their investment performance in 2014, compared to less than half of investors across Asia as a whole. They attribute their success to making considered and informed investment decisions, including: rebalancing my portfolio properly (59%); diversifying my portfolio (34%); taking a certain amount of risk (32%); and, taking professional advice (31%). Only 11% of China investors say their performance was due to "pure luck"; which is what 29% of investors elsewhere in Asia choose to thank. A mere 7% of China investors were unhappy with their investment returns, half the level of all Asia investors, and mostly put it down to not investing enough or not moving enough of their cash into investments (29%).

China investors' wish to diversify extends beyond asset classes to geographic markets too, with almost a third (32%) saying they have invested overseas, higher even than Hong Kong investors at 31% and a step above Asia generally at 25%. Only investors in Taiwan and Singapore invest more overseas, at 55% and 44% respectively.

"China investors have the characteristics of cautious pioneers. They show a strong propensity for seizing new opportunities but are not willing to take too much risk. They prefer instead to take a careful, well informed and diversified approach that offers certain protections from market volatility while creating the potential for satisfactory returns," according to Mills.

Success not going to investors' heads
China investors' savvy, planned approach extends to their investment priorities and expectations for 2015. Most state their top financial priority this year is to better monitor their financial plan (29%) and learn more about investing (22%), whereas elsewhere in Asia, the simple act of "saving more" tops the list.

Moreover, despite their strong past performance and the recent stock market boom, China investors expect relatively moderate returns of 11.4% on average in 2015, with most investors in the 6-10% bracket. By comparison, investors in the Philippines and Indonesia expect 12.4% and 14.5% respectively, and at least a fifth of investors in both these markets expect a return of 20%, more than double the number of investors who feel so optimistic in China.

According to Xu Kelei, Assistant to the CEO at Manulife-TEDA, the Joint Venture Manulife entered into with TEDA in Mainland China1, "Despite the constant stream of headlines about China's economic slowdown, we are generally optimistic on the prospects for 2015. The government has moved aggressively to implement stimulus measures and at the same time is implementing reforms to lay the foundation for more stable long-term growth. That being said, we could see further volatility in the coming quarters. Diversifying across asset classes may help to reduce risk in time of volatility. Those who feel they do not have the time or research skills to uncover attractive investment options should consider working with an investment advisor to select securities in sectors that stand to benefit from government support."

For more findings and related information from the Manulife Investor Sentiment Index in Asia, please visit
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