May 22 2012
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Optimism for global markets on the rise but investors largely staying close to home in 2012
Dubai, U.A.E., May 22, 2012
In the near term, respondents remain cautious, fairly conservative, and in favor of keeping their investment money close to home, a Franklin Templeton global poll has found. When asked about their long-term perspectives, that sentiment starts to change.
Investment Optimism Building
In its annual global survey, Franklin Templeton found that 44 percent of investors surveyed from around the world expect a rate of return on their investments of five percent or greater in 2012. Similarly, when considering stocks specifically, 40 percent expect returns of five percent or greater this year, and optimism increases when respondents consider a 10-year time horizon, with 50 percent anticipating that same level of positive annualized return.
Conducted earlier this year, the Franklin Templeton Global Investor Sentiment Survey polled more than 20,000 individuals in 19 countries that represent 70 percent of the world's GDP.1 The survey provides a unique snapshot of global sentiment and attitudes at a critical juncture in the market cycle.
Uncertainty about the global economy has continued to heavily influence respondents' attitudes toward investing. Slightly more than half of those surveyed (51 percent) believe the global economy has deteriorated, and 45 percent report that they have become "somewhat to more" risk averse over the last three years. Reflecting that conservative outlook, only a minority (one in five) of respondents would seek to make their portfolios more aggressive this year.
"Global uncertainty continues to weigh on investors' minds, and reinforces the need for a well-diversified investing plan and approach to risk management," said Greg Johnson, president and chief executive officer of Franklin Templeton Investments. "This is clearly an area where we believe financial advisors can play a critical role, through the value of their expertise and advice for investors."
The survey found that respondents have a strong home country bias and a preference to invest closer to home in the near term. When given the choice to invest in only one region next year, more than half of respondents (56 percent) would invest in their home country, however, surprisingly, only 37 percent believe their home country will offer the best investment returns.
Home country bias may be generated by two main factors. According to Professor Dan Ariely of Duke University, "The first is an overly optimistic belief about one's own economy. The survey shows us that respondents in almost every country had an expectation of performance in their country that is higher than what would be statistically realistic. The second reason is most likely due to procedural difficulties in investing outside the country - such as less knowledge about how to access these markets, not having recommendations for such products and of course having fewer products available."
Although those surveyed remain hesitant when it comes to investing in global markets, most have dipped their toes in the water. The majority (72 percent) of global respondents have a limited portion (less than 20 percent) of their portfolios invested beyond their home countries, while a minority of investors (28 percent) currently hold 21 percent or more of their investment portfolio outside their home country. This percentage increases to 44 percent with those who foresee a fifth or more of their investments to be outside their home country when the time horizon is extended to look out over the next 10 years, indicating a clear trend toward embracing global investing among long-term investors.
"While many investors may have a home country bias for the near term, the survey findings show that respondents have a longer-term interest in broadening their investment universe across more countries," said Greg Johnson.
Respondents Eye Emerging Markets for Strongest Returns
Respondents remain slightly more optimistic about investment opportunities in emerging markets compared to opportunities in developed countries. Expectations are for emerging markets investments in both stocks and bonds to deliver the strongest returns vs. developed markets over the next five years.
Regionally, the participants in the Asia Pacific are the most bullish when it comes to emerging markets equities, with 67 percent expecting annual returns of 5 percent or more over the next five years. Whereas, respondents in Europe are slightly less bullish, with 56 percent expecting a similar rate of return.
Globally, participants also see the potential of developed market equities, with just less than half (49 percent) anticipating an annual return of 5 percent or more; compared to those in the Americas who were most likely to hold that view with 57 percent anticipating returns at those levels.
Other key global findings include:
• Respondents in India are the most optimistic about the future of their local economy (71 percent), followed by Brazil (64 percent) and Hong Kong (55 percent). The global average is 33 percent.
• Asia Pacific (54 percent) and Latin America (55 percent) took the lead for respondents who expect positive returns of 5 percent or more in the current market environment. Overall, 44 percent of survey participants globally expect this level of returns.
• When considering the long-term investment risks of various asset classes over the next 10 years, stocks had the highest risk perception, with more than half (52 percent) of global respondents considering them to be risky, followed by bonds (38 percent). In addition, fewer respondents think non-metal commodities (35 percent), real estate (33 percent), precious metals (31 percent) and money markets (30 percent) will prove to be risky over the next decade.
• Respondents are heavily focused on guaranteed returns, with 71 percent identifying it as one of the most important factors when deciding where and how to invest.
The 2012 Franklin Templeton Global Investor Sentiment Survey, included responses from 20,623 individuals in 19 countries: Brazil, Chile, Mexico, Canada and the US in the Americas; Australia, China, Japan, Hong Kong, India, Malaysia, South Korea and Singapore in APAC; and Belgium, France, Germany, Italy, Poland and the UK in Europe. The survey was designed in partnership with Dan Ariely, a professor of psychology and behavioral economics at Duke University and conducted online by Qualtrics. Respondents were selected from among those who have volunteered to participate in online surveys and polls and all were 18 years of age or older. Surveys were completed from January 30 to February 13 in all countries except Canada where the survey was completed from March 2 to 8. In general, gender distribution was representative of the larger population of each country, as were marital status, education and age.
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, Fiduciary Trust, Darby and Bissett investment teams. The San Mateo, CA-based company has more than 60 years of investment experience and approximately US$725.7 billion in assets under management as of March 31, 2012. For more information, please visit http://www.franklintempletongem.com
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.
1. Source: International Monetary Fund, World Economic Outlook Database, September 2011. Gross domestic product figure based on purchasing-power-parity (PPP) share of the world total.
Copyright © 2012. Franklin Templeton Investments. All rights reserved.
All investments are subject to certain risks. Generally, investments offering the potential for higher returns are accompanied by a higher degree of risk. Stocks and other equities representing an ownership interest in a corporation have historically outperformed other asset classes over the long term but tend to fluctuate more dramatically over the shorter term. Small or relatively new companies can be particularly sensitive to changing economic conditions due to factors such as relatively small revenues, limited product lines, and small market share. Smaller company stocks have historically exhibited greater price volatility than larger company stocks, particularly over the short term. The significant growth potential offered by Emerging Markets remains accompanied by heightened risks when compared to developed markets, including risks related to market and currency volatility, adverse social and political developments, and the relatively small size and lesser liquidity of these markets.
The information contained in this piece is as of its date, unless otherwise indicated, and is not a complete analysis of every material fact regarding the market, and any industry sector, a security, or a portfolio. Statements of fact cited by the manager have been obtained from sources considered reliable but no representation is made as to the completeness or accuracy. Because market and economic conditions are subject to rapid change, opinions provided are valid only as of the date of the materials. References to particular securities are only for the limited purpose of illustrating general market or economic conditions, and are not recommendations to buy or sell a security or an indication of the author's or any managed account's holdings. The manager's opinions are intended solely to provide insight into how the manager analyses securities and are not a recommendation or individual investment advice for any particular security, strategy or investment product.
The price of shares and income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily a reliable indicator of future results. Currency fluctuations will affect the value of overseas investments. Please consult your professional advisor before deciding to invest. Issued by the branch of Franklin Templeton Investment Management Limited in Dubai ("FTIML"), authorized and regulated in the UK by the Financial Services Authority and regulated in Dubai by the DFSA. This marketing material is directed at professional clients. Dubai office: Franklin Templeton Investment Management Limited, Gate Building, East Wing, 2nd floor, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E., Tel.: +9714-4284100 Fax:+9714-4284140, www.franklintempletongem.com
© Press Release 2012
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