Global Investor Study

Hong Kong investors expect lower returns compared to Asia peers

Hong Kong investors expect their portfolios to return an average of 9.3% over the next five years with “expert” investors expecting even more, a major global study found.

14/12/2018

The Schroders Global Investor Study 2018, which surveyed more than 22,000 investors in 30 markets, including 550 Hong Kong investors, found that Hong Kong investors’ expected annual returns went up 0.3% from the 9% that was polled in the 2017 study. The expectation is slightly lower than their global peers (9.9%) and much lower than their Asia counterparts (11.8%) – the highest regional average; In the Americas, investors expect 10.2% and the figure was lowest in Europe at 8.6%.

The expected sources of returns amongst Hong Kong investors are from growth in their money and income paid out in the form of dividends and interest from a variety of investments including cash, bonds, property funds and equities.

Despite the relatively low expectation in Hong Kong investors compared to their peers, their overall anticipated annual returns exceed the 7.9%1 per annum generated by the Hong Kong stock market (based on the MSCI index five-year average annual returns). This suggests that Hong Kong investors are still over-optimistic on their investments.

Hong Kong ‘expert’ investors expect even higher returns

The study also showed that people who considered themselves as seasoned investors have even higher expectation in their returns.

Hong Kong investors who judged their level of investment knowledge to be “advanced/expert” expect returns of 11.0% a year, over the next five years. Their expectation is higher than investors who considered their level of investment knowledge to be “beginner/rudimentary” (8.3%) and “intermediate” (9.1%).

Expected annual returns based on investment knowledge

  Hong Kong Asia Global
Advanced/Expert 11.0% 13.6% 10.9%
Intermediate 9.1% 11.6% 9.7%
Beginner/Rudimentary 8.3% 10.0% 8.8%
Average 9.3% 11.8% 9.9%

Source: Schroders Global Investor Study 2018.

In comparison, at a country level globally, investors in Indonesia on average expect the highest returns, at 16.8% a year. Expectations in other emerging countries were also high, with investors in Brazil, China, Thailand and India all looking for average annual returns in excess of 13% between now and 2023.

What do professionals predict for future returns?

Schroders Chief Economist Keith Wade has recently downgraded his forecast for 2019 global growth to 2.9% and expect it to further slow to 2.5% in 2020. The expectation was driven by the slower economic growth across major economies, which appears to be converging downward as the US slows and others fail to strengthen.

Particularly on emerging markets, Keith Wade said: “We think emerging economies could slow to 4.5% in 2019, as trade tensions and softer tech demand has impacted the wider Asian economies. However, with a peak in US rates and the start of tightening cycles elsewhere, we expect the US dollar to weaken in 2019 which could be the silver lining for more growth and less inflation across emerging markets.”

Charles Prideaux, Global Head of Product and Solutions, thinks that in a more challenging future environment, factors such as asset allocation, access to multiple sources of return, active stock selection and risk management will be critical in meeting the goals of investors.

Charles Prideaux said, “As interest rates normalise and quantitative easing unwinds, we think there will be a greater focus on the reliability of corporate earnings as market volatility increases. We believe returns from market indices will also be lower, and therefore there will be greater need for active fund managers who can generate alpha in the period to come.”


1 Thomson Reuters Datastream data as at 3 October 2018. Five-year MSCI Index returns between 01 Oct 2013 and 01 Oct 2018 are based in the local currency.

 

Important Information
Any security(s) mentioned above is for illustrative purpose only, not a recommendation to invest or divest.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Opinions stated are matters of judgment, which may change. Information herein is believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. Exchange rate changes may cause the value of the overseas investments to rise or fall. For risks associated with investment in securities in emerging and less developed markets, please refer to the relevant offering document.
The information contained in this document is provided for information purpose only and does not constitute any solicitation and offering of investment products. Potential investors should be aware that such investments involve market risk and should be regarded as long-term investments.
Derivatives carry a high degree of risk and should only be considered by sophisticated investors.
This material, including the website, has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.