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APAC Investor Survey: Optimism about Economic Recovery, But Concerns about Personal Finances Persist

While investors are more positive on the macroeconomic outlook for 2021, a majority say they are concerned about their personal finances.

As 2020 drew to a close, optimism about the year ahead was tangible, with expectations for economic recovery amid the broad rollout of vaccines. In December, we conducted our second quarterly survey of 2,500 investors in Australia, Hong Kong, Singapore, Taiwan, and Japan to gauge sentiment in these challenging times.

Despite a surge of optimism among the respondents about the macroeconomic outlook and their portfolio expectations for the coming 12 months, investors had rising concerns about their personal finances.

Despite rising optimism, Asia-Pacific investors remain concerned

Our 3Q survey saw a marked disparity between investors’ optimistic expectations for growth in their portfolios and their much gloomier outlook for local, regional and global economies. This has now narrowed: Macroeconomic outlooks that were net negative turned sharply positive at year-end. However, investors still tend to be more optimistic about their own investments than the economy in general.

In the 3Q survey, 47% of investors expected the COVID-19 pandemic to have a negative impact on their portfolios over the next 12 months. In the latest poll, however, almost as many said the pandemic will likely be positive (37%) as negative (38%).

Despite Asia-Pacific investors’ rising optimism about the macroeconomic environment, over 70% of respondents said they were just as concerned, or even more concerned, about a variety of broader or longer-term financial issues (such a job security and retirement savings) than they were following the first wave of the pandemic in mid-2020. Only around a quarter of respondents say they were less concerned than they were six months ago.

While there is no simple explanation for the paradox between this pessimism and the optimism exhibited in other responses, investors should be wary of succumbing to various biases that might affect their decision-making, especially in times of volatility.

COVID-19 has boosted investors’ self-confidence

In a reversal from the previous quarter, more respondents (39%) said that the pandemic is likely to enhance their confidence in their investment decision-making than say it is likely to make them lose confidence (32%). This may reflect the persistent disconnect between high asset valuations and macro data, but it may also be a sign of biases that can lead investors to overestimate their own abilities. For instance, as with the previous quarter, there was a notable generational disparity in responses. Younger investors are still much more likely (55%) to always or often trust their own experience when investing than older ones (43%). However, they are also more likely to trust in professional advice than their older counterparts.

Overall, compared to the previous quarter, there was a slight increase in the percentage of those who say they “always” or “often” trust professional investment advice, perhaps suggesting that the turmoil of the past year has reinforced the value of professional insights.

Rising interest in active management, but investors no more likely to reallocate

The 4Q survey saw a 5 percentage point increase in the number of investors seeking to allocate more to active strategies, with 51% of respondents across the region intending to allocate more to active in the coming three months. Despite their stated intention and an improved macroeconomic outlook, there was no significant increase in investors’ plans to realign portfolios. In 4Q, 44% of respondents said they planned to significantly rebalance their portfolios in the next three months, up just two points from the previous quarter.

Recognising potential biases in our behaviour can make us better investors

Our survey results imply inconsistencies between how investors say they will react and how they do act. We all have biases that influence the decisions we make and can lead us to act in ways that are inconsistent with our more rational beliefs. Whether this means investors play it safe and fail to take advantages of opportunities, or whether overconfidence leads them to take on more risk than they intend, it underlines the importance of being aware of possible biases that may affect decision-making. While it’s nearly impossible to be completely unbiased when making investment decisions, investors can lessen the impact by identifying the biases they are most apt to fall back on and employing strategies to help overcome them.

For greater detail on the survey findings and the results for your country, along with resources on behavioral science and common cognitive and emotional biases, visit our PIMCO APAC Investor Sentiment Survey homepage.

The Author

Kimberley Stafford

Global Head of Product Strategy

Ichiro Takeuchi

Head of Client Management and Business Management, Japan

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Alpha represents a portfolio’s risk-adjusted performance (the difference between a portfolio’s actual returns and the expected performance, given the portfolio’s level of risk as measured by beta). It is possible that during any timeframe, the alpha of a portfolio can be positive while the actual total return performance of the portfolio is negative.

Charts, graphs and statistical information referenced in this publication are all derived from the result of the survey. Data collected from the participants/ respondents are for the sole purpose of this survey. Charts and graphs represented are for illustrative purposes only. Source of information, charts and graphs referenced in this publication is PIMCO unless otherwise stated.

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Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

The survey results contain the opinions of the respondents and not necessarily those of PIMCO. The data contained within the report may not be related to any PIMCO product or strategy and should not be relied upon for any investment decision. This survey has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. These should not be taken as a recommendation of any particular security, strategy or investment product. All investments carry risk and may lose value. To the maximum extent permitted by law, PIMCO and each of their directors, employees, agents, representatives and advisers disclaim all liability to any person for any loss arising, directly or indirectly, from the information in this publication. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission of PIMCO. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. © PIMCO, 2021.

APAC Investor Survey: COVID-19 Has Hit Confidence, but Investors Still Trust Their Own Experience Most in Decision-Making
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