SOURCE: Franklin Templeton

Franklin Templeton

March 24, 2014 10:00 ET

Global Survey Finds Investors Optimistic About 2014, but Reluctant to Take on More Risk

Franklin Templeton Releases Results of 2014 Global Investor Sentiment Survey

MEXICO CITY, MEXICO--(Marketwired - Mar 24, 2014) - One of the largest surveys of its kind, the 2014 Franklin Templeton Global Investor Sentiment Survey, www.franklintempleton.com.mx/encuestaglobal, polled 11,113 investors in 22 countries across Africa, Asia Pacific, the Americas and Europe on their current attitudes towards investing and their expectations for 2014 and the decade ahead.

Five years after the onset of the 2008-2009 market downturn, investors continue to show signs of risk aversion, despite an optimistic outlook for the future. Globally, 52 percent of investors are planning to become more conservative with their strategies this year, taking on less risk with the potential of earning lower returns. However, this risk aversion is less pronounced than last year when the annual survey showed that 57 percent of investors planned to be more conservative with their investments.

This trend towards conservatism, with 58 percent of Mexican investors adopting a more conservative approach, runs counter to the fact that most investors expect better stock market performance and higher returns from their investments this year, as well as the fact that four out of five investors feel optimistic about reaching their financial goals.

         
  Very Optimistic Optimistic Pessimistic Very Pessimistic
México 18% 75% 6% 1%
         

"In the long term, the greatest risk investors run is remaining too risk-averse for too long, building portfolios based on short-term phenomena, not long-term realities, which puts them in danger of falling well short of their goals. A smart approach to managing investment risk is not to categorically avoid risks but to ensure that risks taken are intended, understood and appropriately compensated with an eye on achieving longer-term investment goals," said Hugo Petricioli, Franklin Templeton Investment's Country Manager for México.

Investor Perceptions
The survey has shown that investor perception often diverges from reality, a fact that may impact investors' ability to make well-informed investment decisions. Just over half (55 percent) of investors believe their local stock market was up last year, when in reality, 17 of the 22 markets surveyed (77 percent) experienced positive performance.

In 2013, about one-half of all investors said the stock market was up; this was quite a bit lower than their expectations for 2013. This caused a decrease in their 2014 perspective, although positive overall, from 79 to 71 percent of total respondents believing the market will be high and increasing from 10 to 17 percent the ones who believe it will be down.

Asset Class Expectations
Consistent with 2013 survey findings, real estate and precious metals topped the list of asset classes that investors expect to perform best in the year ahead. Over half (59 percent) of Mexican investors believe real estate will be among the top-performing asset classes this year. Precious metals fell out of favor with some investors this year, dropping from 61 to 49 percent, while investors' outlook for stocks was up 3 percent year-over-year.

   
Perceived Top-Performers 2013 Perceived Top-Performers 2014
  1. Precious Metals - 61 percent   1. Real estate - 59 percent
  2. Real estate - 56 percent   2. Precious metals - 49 percent
  3. Stocks - 39 percent   3. Stocks - 41 percent
       

Of the countries surveyed, investors in Japan and Hong Kong showed the greatest preference for stocks, with over 77 percent ranking stocks among the top three asset classes for expected 2014 performance. Greek investors had the most optimistic outlook for precious metals, while Australian and Malaysian investors showed the strongest preference for real estate investments this year.

Investors See Most Risk and Reward Potential in Stocks
While investors see the most potential in stocks this year, they also recognize the risks involved with investing in the asset class. Regionally (Latin America), stocks topped investors' lists of the asset classes they believe will carry the most risk this year with 40 percent, followed by the US dollar and government securities (with 39 and 30 percent respectively). In México, on the contrary, stocks occupy the third place with 35 percent, preceded by the US dollar and government securities with 36 and 38 percent respectively.

Investors Look Beyond their Borders for Opportunity 
Globally, two-thirds of investors believe the best equity and fixed income opportunities will be found outside their home countries this year, echoing findings from Franklin Templeton's 2013 survey.

Investors in México showed great interest in investing abroad -- mainly in the U.S./Canada, their own country and Asia, as they consider these regions will offer the best returns in stocks with 27, 23 and 19 percent respectively. In fixed income, Mexican investors consider that over the next 10 years, U.S./Canada with 22 percent, México with 21 percent and Asia with 15 percent will show the best returns.

Where is the Money Heading? -- Asset Class Preferences for 2014
On a whole, global investors indicate they are most likely to add real estate, home country and emerging market equities, as well as precious metals to their portfolios in 2014. In México, a similar belief is perceptible.

   
Asset Class Percentage
Real estate 58
Precious metals 37
Equities in my country 32
Bonds in my country 26
Developed market equities 22
Alternatives 20
Emerging market equities 18
Developed market bonds 18
Emerging market bonds 16
None of the above 5
   

More than half (58 percent) plan to increase their investment in real estate and little more than one third (37 percent) will most likely go for precious metals. Thirty-two percent plan to add or increase their exposure to domestic equities while around one quarter (26 percent) plan to increase their investment in bonds in their country.

Tax Effect on Future Investment Decisions
With the new legislation of a 10 percent capital gains tax on individual profits from stocks sales, the majority (88 percent) of Mexican investors feel it will very likely impact their future investment decisions. Only 5 percent of the respondents believe the tax reforms will not have an impact on their investment decisions.

                 
    Very likely   Somewhat likely   Somewhat unlikely   Will not have an effect
México   46%   42%   8%   5%
                 

Benefits of Consulting a Financial Advisor
The survey results show that, globally, investors who work with a financial advisor have more diversified portfolios and are more likely to invest outside their home countries than those who don't work with an advisor. They're also more likely to be optimistic about reaching their financial goals and have higher expectations for their investment returns. "Navigating global markets can be a complex endeavor. These survey results show investors can benefit from working with a financial advisor to make fully informed investment decisions to appropriately position their portfolios," said Greg Johnson, chairman, CEO and president of Franklin Templeton Investments.

Top Concerns -- Fiscal Policy in the US and Europe
When asked to rank their top concerns about investing in Europe and the US, global investors showed the greatest concern about government fiscal issues and their drag on the economy. 

When considering European investment opportunities, 64 percent of Mexican investors ranked "euro zone debt crisis" as their top concern (62 percent globally). "Slow economic outlook" (42 percent) and "general market volatility" (32 percent) rounded out the top three concerns.

When considering the US, 60 percent of global investors ranked "large fiscal debt" as their top concern and 56 percent of Mexican investors did as well, followed by "slow economic outlook" (41 percent), same as in Europe.

Methodology
The Franklin Templeton Global Investor Sentiment Survey www.franklintempleton.com.mx/encuestaglobal, conducted by ORC International, included responses from 11,113 individuals in 22 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia Pacific; France, Germany, Greece, Italy, Poland, South Africa, Spain, Sweden and the UK in Europe, and the United States and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America, Asia Pacific and South Africa and 25 and older in Europe and North America. Respondents were required to own investable assets, such as stocks, bonds, mutual funds, etc. In addition, a minimum investable asset threshold was set for each country to ensure that the respondent had sufficient investments, providing a knowledge base from which to answer the survey questions. The survey was completed from 2 to 15 January, 2014, in all countries.

About Franklin Templeton

Franklin Resources, Inc. (NYSE: BEN) is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2 investment teams. The San Mateo, CA-based company has more than 65 years of investment experience and over US$882 billion in assets under management as of February 28, 2014. 

For more information, please visit www.franklintempleton.com.mx/ or connect with Franklin Templeton on Twitter (@FTI_Global). Read the Beyond Bulls & Bears blog featuring perspectives from Franklin Templeton investment professionals around the world and the Investment Adventures in Emerging Markets blog from Mark Mobius (@MarkMobius), executive chairman of Templeton Emerging Markets Group.

This material does not constitute investment advice or an invitation to apply for securities. Investors should seek professional financial advice and obtain a full explanation of any proposed investment before making a decision to invest. Investments involve risks. The value of investments can go down as well as up, and investors may not get back the full amount invested. Not all products and services are available in all jurisdictions.

For more information please visit: www.franklintempleton.com.mx or call in México City (55) 5002 0650 or dial 01 800 362 TEMPLETON.

Franklin Templeton Asset Management México S.A. de C.V., Paseo de la Reforma #342, 8th floor. Colonia Juárez, C.P. 06600, México D.F., México

Copyright © 2014. Franklin Templeton Investments. All rights reserved.

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