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Equity products top choice for Singapore investors amid Fed rate cut expectations: Fidelity International

Ashley Lo
Ashley Lo • 4 min read
Equity products top choice for Singapore investors amid Fed rate cut expectations: Fidelity International
The survey found that investors are beginning to replace cash products with equity products amid increasing expectations of a global interest rate-cutting cycle.
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With cash-related products offering their highest interest rates in more than a decade, today’s average investor in Singapore has around 42% of their current asset allocation in cash savings and term deposits, according to Fidelity International’s Asia Pacific (Apac) investor study. The study focuses on investors across mainland China, Hong Kong, Taiwan, Singapore, Japan and Australia.

However, investors are beginning to replace cash products with equity products amid increasing expectations of a global interest rate-cutting cycle in the next six to 12 months.

Following a few years of market volatility and increased inflation, the latest study found that 51% of Singapore investors are feeling “comfortable” with their financial situation, which is 4% higher y-o-y. Despite the increase, Singapore continues to lag behind its regional peers, with Australia, Hong Kong and mainland China’s numbers at 68%, 65% and 64% respectively. This sentiment was found to be consistent across all the age groups surveyed, from investors aged below 30 to 69.

The study also found that 69% of Singapore investors own equities, while 67% have an insurance-related product. About 56% of the investors polled have a fixed deposit.

Across the region, the recent study also reported that investors in Singapore and Hong Kong favour more diversified portfolios and are more inclined to add significant equity exposure to cash-related products.

In comparison, investors in mainland China and Japan appear to invest more conservatively, focusing on term deposits. 

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The latest study also found that in terms of top investment priority, around 53% of Singapore investors are focused on long-term capital accumulation. About 30% of the same investors polled say they invest to generate a regular income. 

That said, 37% are investing with a period of more than five years in mind, 16% for three to five years, and just 4% investing for less than 6 months. 

However, despite their investment objectives or timeframe, investors in Singapore expect an annual return of 6.7% per annum, the lowest percentage across the Apac region. In comparison, markets with a higher expectation on returns include investors in Taiwan and Australia, who expect returns of 9.5% and 8.8% respectively.

See also: Dividend-focused investing in China — a winning strategy

Across all six Apac markets surveyed, investors are adopting a more risk-on position and expect to decrease their cash holdings to deploy capital into other investment products. Over half - or 53% - of investors in the region are ramping up their equity investments, which have historically benefited as interest rates decrease. This is especially so for 61%, 60% and 59% of investors in Taiwan, Singapore and Australia, respectively. 

Despite this, 59% of Apac investors are still investing with caution in the coming year due to uncertainties in the external environment. The study found this most evident in China and Japan, which included 77% and 37% of investors respectively. 

While the study showcases a growing appetite for risk assets amongst investors, 45% of Singapore investors are planning to increase their cash positions in the next 12 months, a percentage slightly higher than the regional average of 40%. 53% of Singapore investors plan to increase their investments in fixed income products, while 38% intend to add to their fixed deposits.

The way Sabrina Gan, Fidelity International’s head of Southeast Asia and country head of Singapore, sees it, young investors, in particular, should start to actively manage their portfolio and focus on growth assets with time on their side.

However, all investors should remain invested in the market throughout cycles in order to achieve long-term capital growth, she says.

Referring to the trends seen in the study, Gan notes that it is “positive” to see that the majority of Singapore investors are actively considering investment opportunities outside of cash products, such as equities and bonds, in order to capture the next market cycle. 

“While cash is great for maintaining liquidity and flexibility, having too much cash on the sidelines as interest rates come down is most likely to hurt overall financial returns. With most investors primarily investing for long-term capital accumulation and expecting an annual rate of return around 6.7%, looking at options beyond cash is critical,” she adds. 

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