Craig Mowll
Certitude Global Investing Intentions Index predicts a festive rush for overseas assets as the proportion of investors looking to increase their international exposure within the next month is at its highest level since the Index began.
Demand from Australian active investors for overseas assets increased in November to near on record highs and these investors are more likely than in previous months to be acting within the next 30 days according to the Certitude Global Investing Intentions Index (CGIII). The CGIII found that 20% of active investors are looking to increase their exposure before Christmas. For the month prior the corresponding figure was 13% and in September just 11% planned to invest within the next 30 days.
The CGIII, which collated the views of almost 800 actively engaged investors and measured their net demand for global investments found that overall, demand for overseas investments increased slightly from last month for all active investors. Among High Net Worth (HNW) investors the CGIII revealed that demand for overseas investments increased significantly to be on par with the 4 month high.
Craig Mowll, CEO of Certitude Global Investment said: “Results this month show that investors are increasingly decisive and many are seeing Christmas as a deadline for making overseas investments as they prepare to take a break over the traditionally quiet month of January.
“Elsewhere in the CGIII we are seeing High Net Worth investors continuing the momentum of previous months, increasing their exposure in markets they think are offering good investment opportunities at the right price.”
When investors were asked to specify the international markets that they are interested in investing more in over the next 12 months, the US/North America remained the most popular choice with 48% (up 2% pts) of global investors indicating they would invest in this region. This slight increase from October reflects ongoing investor confidence amidst promising economic data, including a 10thconsecutive month of employment growth and news that the US economy is likely strong enough to withstand an increase in interest rates for the first time since 2006.
Interestingly, the CGIII recorded a substantial increase in investor interest in Asia (18% up 7% pts), suggesting that investors are using Asia to increase their exposure to emerging markets at the expense of a broader emerging market exposure which would include; Eastern Europe and South America.
Mr Mowll commented, “Over the last month we have seen some of the Asian markets rallying on the back of the strength of U.S. data and China’s benchmark index is leading the gains amongst these markets. Hong Kong’s benchmark Hang Seng Index is another to have made good gains. We would expect that the Asian equity markets are appealing to those investors wanting measured exposure to emerging economies.”
Equities remain the preferred investment tool for gaining international exposure with 81% (steady) stating it is their preferred asset class for increasing exposure over the next 12 months. Worthy of note, however, is the increasing interest in commodities and fixed income where 9% and 8% respectively were interested in investing more over the next 12 months, up from 7% and 5% respectively last month.
This month’s CGIII also recorded a rebound in actively managed international funds as investors were asked to specify how they intended to obtain the increased exposure to these asset classes (40%, up 6% pts).
Commenting on the reasons for the rise in demand for actively managed international funds, Mr Mowll said: “This month we are seeing more investors planning to increase their exposure via actively managed funds in preference to direct shares. With a substantial increase in demand for Asia we expect that many of these investors are looking to take advantage of the knowledge of specialist fund managers rather than making their investment choices alone in a market where they may not fully understand the dynamics.”
Finally, the CGIII found that the most common concern investors have in relation to their investments is the threat of another global financial crisis. This month 53% of investors sighted this as their biggest concern compared to 49% last month. Of note is that the other concerns to have increased over the last month relate to domestic issues. The number of investors stating that their biggest concern was the state of the Australian economy increased from 36% to 41%. The proportion of investors reporting concerns about Australian debt levels increased from 24% to 25% and the corresponding figure for property prices was an increase from 19% to 25%.
Mr Mowll concluded by saying that this month’s CGIII shows that domestic issues are weighing on the minds of investors and this may be playing a part in increasing demand for overseas investment.
“At the moment we are seeing a lot of commentary around domestic issues and a possible recession, so by comparison the news from other markets appears more optimistic. With the festive season marking a traditional slowdown in investment activity it seems likely that some investors are diverting funds abroad in the short term at least as international markets, in particular Asia, appear to offer good opportunities,” he said.
It is also clear that many investors who are keen to invest offshore are aware of the benefits of managed funds, particularly those covering a region where they may not have investment expertise.”
November CGIII – Other key findings
- The CGIII went up slightly in November, from 168 in October to 172 in November. Slightly more investors plan to increase their exposure to international shares (16%, up 1% pt) compared to October; 3% (steady) plan to decrease their exposure.
- Investors’ concern level with global markets decreased to 5.9 (out of 10) in November, down from 6.1 in October.
- More investors want to gain their international exposure via actively managed funds (40%, up 6% pts) than via direct shares in overseas companies (35%, down 1% pt)
