U.S, Canada are the 'big bulls'; Mexico less rosy
MEXICO CITY, MEXICO–(Marketwired – May 20, 2015) – Results have been released for the 2015 Franklin Templeton Global Investor Sentiment Survey, which polled over 11,500 investors in 23 countries across the Americas, Asia Pacific and Europe.
Now in its fifth year canvassing investors across the globe, the survey has included Mexico since its inaugural year in 2011. One of the broadest surveys of its kind, respondents shared their views and current attitudes toward investing and their expectations for 2015 and the decade ahead.
Investors Anticipating Positive Returns in 2015
More than half (58 percent) of global investors surveyed believe their local stock market will post positive returns in 2015. Regionally, the U.S. and Canada (64 percent) are the most optimistic about future local stock market returns, closely followed by Europe (62 percent) and Asia Pacific (56 percent). Latin American investors are the least likely to expect positive local stock market performance, with less than half (46 percent) expecting positive returns. Likewise, less than half (46 percent) of Mexican investors expect the market to finish the year with positive returns. This represents a more pessimistic market outlook than last year's survey.
When it comes to perceptions of past performance, the survey has consistently shown that investor perception often diverges from reality. When asked about 2014 stock market performance where the Mexican Bolsa IPC Index increased over four percent, the majority (56 percent) of Mexican investors erroneously believed the Mexican market finished the year in negative territory.
"Many markets around the world have enjoyed strong performance over the past several years," said Hugo Petricioli, country manager for Mexico for Franklin Templeton. "Investor optimism may not be based on the underlying value of individual companies, industries, and countries as we are likely to encounter some rough patches ahead. This will be an attractive period for active management, where picking stocks and bonds will be the name of the game."
Investing Beyond Borders
Globally, more than two-thirds of investors believe that in the coming year the best equity and fixed income returns will be found outside their home country, which echoes Franklin Templeton's 2013 and 2014 survey results. Investors in Italy and Chile showed the greatest interest in investing abroad, with 85 percent of investors believing the best equity and fixed income opportunities exist beyond borders.
Home country bias on the other hand continues to be prevalent in the U.S. and Canada, yet is largely absent in Europe and Latin America — this has been a consistent theme since 2013 in Latin America. Home country bias in Latin America has continued to decline year-over-year with 18 percent of investors believing their home country will provide the best equity returns in the next 10 years and 22 percent believing the best fixed income opportunities are within their borders.
In Mexico, investors surveyed continue to recognize the investment opportunities that exist outside their home country, a trend the global survey has shown over the past five years. The Mexican investors who participated in the survey showed the greatest interest in investing abroad, with 82 percent believing the best equity opportunity exists beyond their borders. In addition, 78 percent believe that the best fixed income opportunities will be found out of Mexico. For 2015, as well as the next 10 years, Mexican investors believe the best equity and fixed income opportunities will be found in U.S. and Canada.
"The underlying growth drivers of an individual country inherently influence the way it interacts with the global economy," said Peter Langerman, CIO of Franklin Mutual Series. "The market divergence we are experiencing means that it is becoming increasingly important to be selective when pursuing opportunities in a specific market. I would encourage investors to look beyond the old model of global investing, where the world was simply viewed through the binary lens of 'domestic' and 'foreign' and consider company specific drivers."
Emerging and Developed Markets Don't See Eye to Eye
Emerging and developed market investors don't see eye to eye when it comes to several key risk factors. Those who live in emerging market countries are more than twice as likely as those who live in developed markets to be concerned about inflation, and nearly twice as likely to be concerned about rising interest rates and the effects of falling oil prices.
Conversely, developed market investors are nearly twice as likely to express concern over the Eurozone debt situation. Latin American investors are most concerned with government fiscal policy and inflation at 39 percent and 37 percent respectively, while Mexican investors show concern about falling oil prices (45 percent), which were identified as their top concern of 2015 followed by the government's fiscal policy (43 percent).
Stocks Remain in Favor
For a second year in a row, real estate, stocks and precious metals continue to top investors' lists of the most favored asset classes globally. Over half (57 percent) of this year's survey respondents from Mexico expect real estate to be among the top performing asset classes in 2015. Precious metals (46 percent) and stocks (44 percent) round out the top three for Mexican investors.
Looking at a longer investment horizon, the Mexican investors surveyed project real estate (57 percent), precious metals (46 percent) and stocks (42 percent) to be the top three best performing asset classes over the next 10 years. Expectations of Mexican investors on top-performing asset classes in 2015 and the previous year:
Projected Top-Performers 2014 Projected Top-Performers 2015
Real estate – 59 % Real estate – 57 %
Precious metals – 49 % Precious metals – 46 %
Stocks – 41 % Stocks – 44 %
Risk Management is Key
Stocks are clearly viewed as top performing both for the near term and long term; however investors also view the asset class to be among the riskiest in 2015 and over the next 10 years. Thirty-two percent of Mexican respondents chose stocks as one of the riskiest asset classes, with the US Dollar (35 percent) and the Non-metal commodities (40 percent) also in the top three in 2015. These top three hold steady looking out 10 years as well.
Asset class specific views aside, an overwhelming number of global investors (94 percent) ranked the importance of risk management expertise as somewhat to very important when selecting an investment manager. Likewise, almost all investors in Mexico (98 percent) view risk management expertise as somewhat to very important.
The majority of global investors who participated in the survey (55 percent) believe their investment strategy will be more conservative in 2015 and Mexico is not an exception. Almost two-thirds of Mexican investors who responded (61 percent) are planning to adopt a more conservative strategy, almost twice as many as those who will opt for a more aggressive one (34 percent). In spite of this, the majority of Mexican investors are still optimistic about reaching their financial goals (86 percent); however, this number has decreased from 2014 (down 7 percent).
"Views of what constitutes risk vary within the industry, and it's important for investors to have a clear understanding of what risk means to them and how it impacts their portfolios," said Greg Johnson, chairman, CEO and president, Franklin Templeton Investments. "In today's volatile, low interest rate environment, investor sentiment is tempered by a sense of uncertainty, which may be keeping some from investing to support their long-term goals.
In this scenario, investors can benefit from the perspective of a global asset manager with decades of experience navigating the world's markets." Security, Quality of Life Influence Investing Goals Globally investors ranked saving for retirement, planning a vacation, and being prepared for emergencies as their top three investment goals in the year ahead. Saving for retirement is the number one goal for U.S./Canada investors with 73 percent choosing it as a top priority.
Retirement a number one priority
Retirement is also the number one priority for Asia Pacific investors with 43 percent indicating it as a top investment goal. Meanwhile, investors in Latin America are most focused on saving for the purchase of a new home (50 percent) and investing in/starting a business (48 percent), while European investors place the highest priority on planning a vacation (49 percent).
In Mexico, the top investment goal for was investing/starting a new business (52 percent). Purchasing a new home (41 percent) and saving for retirement (45 percent) were also in the top three investment goals for Mexican investors. While priorities vary by region, overall they reflect a need for security and quality of life. The vast majority of global investors (81 percent) are optimistic about reaching their financial goals with the highest levels of optimism coming from India, the UAE and China at over 90 percent in each country.
Europe and the U.S./Canada showed the biggest increase in optimism compared to 2014 survey results. Up four percent from last year, 87 percent of investors in the U.S./Canada are optimistic about reaching their financial goals. Latin American investor sentiment is on the decline, with an 11 percent drop in optimism from 93 percent in 2014 to 82 percent in 2015. Brazil had the largest decline in investor optimism for reaching their financial goals, with a 19 percent drop to 71 percent compared to last year at 90 percent. Spain, France and China had the largest increase at 14 percent, 12 percent and 12 percent respectively. Mexico had a slight drop in optimism (7 percent) but is still overall optimistic about reaching their financial goals (86 percent).
Methodology The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 11,508 individuals in 23 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia; France, Germany, Greece, Italy, Poland, Spain, Sweden, and the UK in Europe, South Africa, the UAE, and the United States and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America, Asia (except for Japan) and South Africa and 25 and older in Europe, Japan, the UAE, Canada and the U.S. 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 February 12 to March 2, 2015, in all countries.
About Franklin Templeton
Franklin Templeton Investments has a presence in Mexico for almost 20 years, and its funds have been investing in the country since the early 1980s. In 2005, the company opened its first office in Mexico and its asset management operation, Franklin Templeton Asset Management Mexico, began operations in 2009.