Published 7:00 PM, March 14, 2016
SAFE CHOICE. While investor sentiment towards cash fell, cash still ranks as the most preferred asset class, according to the latest Manulife survey. File photo by AFP
MANILA, Philippines – Filipino investors are increasingly shifting to cash as their "best-of-the-worst" choice in a volatile market, the latest Manulife Investor Sentiment Index (MISI) revealed.
The survey also indicated a dramatic fall in sentiment towards all asset classes, due to concerns that market conditions are unlikely to improve.
Global markets have been beset with volatility since the latter part of 2015 as a result of low oil prices, China's slowdown, and the US Federal Reserve's raising of interest rates. The Philippine Stock Exchange (PSE) has not escaped this, seeing its net income for 2015 drop by 21%.
PSE president Hans Sicat said in a statement last month that the PSE expects the volatility to continue into 2016, but the bourse's capital raising activities are seen to pick up after the May elections.
'Safest option'
Manulife said savings in cash has been the least affected by global conditions, prompting many investors to change their strategy and increase their cash holdings.
Sentiment towards fixed income, equities, and mutual funds have all decreased since the second quarter of 2015, when the last surveywas conducted, down to 60 from 81, 64 from 83, and 61 from 84 respectively.
Sentiment towards cash dropped less significantly, although it still fell 12 percentage points, to 76 from 88.
One-fifth of investors expect a 5% or less return on their investment and only 12% expect a return of 10 to 15% on their investment.
Manulife said this may explain why cash remains the most favored asset class, with investors seeking investments they perceive to be less risky.
A low inflation rate in recent years may also contribute to this sentiment.
"Despite forex market volatility, and uncertainty about the Federal Reserve interest rate hike last year, the Philippine peso has been one of the better performing currencies. High expectations in the Philippines that the currency will appreciate, combined with concerns about market volatility, likely explain investors' preference for cash," said Aira Gaspar, Manulife Philippines chief investment officer.
"Nevertheless, capital flight from emerging markets could cause the peso to weaken in the future, so it's important that investors do not rely too heavily on cash," Gaspar added.
While investor sentiment towards cash fell, cash still ranks as the most preferred asset class, with Filipino investors increasing their cash holdings to 34% of their total assets from 23% in the last survey.
In addition, 40% of investors are looking to invest more in or start investing in cash in their local currency.
"Redeploying a portion of bank deposits into more efficient investments that have the potential to deliver recurring income and capital appreciation over the long-term will reduce longevity risk – the risk that a retiree will outlive his or her retirement income," Gaspar said.
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