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JF Investor Confidence Index Shows Signs of Profit-Taking Amongst Retail Investors

Jul 09, 2007

Hong Kong, 9 July 2007: JF Asset Management (JFAM) today announced the results of its fourth quarterly survey conducted for the JF Investor Confidence Index (JFICI) in Hong Kong. The Index is designed to reflect local investor sentiment towards the Hong Kong stock market over the next 6 months. The latest findings show that Hong Kong investors are optimistic about the global investment environment but in the near term they may make some adjustments to their current investment portfolio of a profit-taking nature.

In the latest survey, the JF Investor Confidence Index recorded 129 against a neutral level of 100,rising slightly from 128 in the first quarter of 2007. This indicates that Hong Kong investors are positive with regard to the current market situation, but they do not expect a further sharp rise in the value of their portfolios in the third quarter of 2007 similar to that which they enjoyed in the three months to June.

Mr Terry Pan, Head of Retail Business, “It is encouraging to see that this quarter,  investors’ confidence towards the Hang Seng Index, the local economy, the local & global investment environment and the value of their portfolios all recorded modest increases. Having said that, they are not likely to increase their equity investments at this juncture. Some degree of profit-taking may indeed take place, in view of the substantial gains they have enjoyed in the previous months. However, any market weakness in the third quarter can be seen as a technical pullback, rather than the start of something more worrisome. A summer correction may also offer the opportunity to add to equity positions in anticipation of longer term gains.”

The JF Investor Confidence Index score is derived from asking survey respondents six questions to clarify the confidence of investors about (Q1) the Hang Seng Index, (Q2) HK economic environment, (Q3) HK investment environment and sentiment, (Q4) global economic environment, (Q5) the possibility of personal asset appreciation, and (Q6) the possibility of increasing their investment. These 6 questions form the sub-indices of the JF Investor Confidence Index. The Index and all subindices have a range between 0 and 200. A number greater than 100 represents a positive outlook and vice versa.

52% of the investors polled this quarter intend to take an aggressive stance over the next six months, which is similar to the 51% in the last survey. In terms of market preference, 72% of aggressive investors and 83% of conservative investors prefer to concentrate their equity investments in Hong Kong, again similar to the results observed in the March survey. This suggests that more aggressive investors maintain a positive view towards the Hong Kong stock market in the remainder of 2007.

Mr Geoff Lewis, Head of Investment Services added, “We agree with local investors that the fundamentals in Hong Kong and China are very solid. Strong economic growth in both China and Hong Kong, the 2008 Beijing Olympics, the secular rally in China A shares, the vibrant employment market in Hong Kong, and the psychological effects of the budget tax cuts are all contributing to the current bullish market sentiment.” On a more cautious note, Mr Lewis highlighted, “There is currently quite a lot of froth in the A share markets. This is not just a worry for the Chinese authorities, who are doing all they can to remove the excess liquidity. It may also be deterring some Hong Kong investors from further investments in Hong Kong-listed China stocks, even though valuations are still reasonable and much lower than their A share counterparts.”

The survey also indicates that 29% of survey respondents had invested in overseas markets in the past 6 months. In terms of their future market preferences, Mainland China (69% for Jun 07 vs. 67% for Mar 07), Europe (28% for Jun 07 vs. 28% for Mar 07) and Asia (27% for Jun 07 vs. 24% for Mar 07) continue to be their preferred overseas markets. However, the likelihood of their investing further in these markets during the next 3 months has decreased.
Cimigo, an independent market research company, was commissioned to conduct the survey on behalf of JF Asset Management. The survey was developed by interviewing a random sampling of 500 retail investors (N = 500) aged between 21 and 59 who have liquid assets in excess of HKD100,000. The survey was completed in June 2007.

JPMorgan Asset Management has been monitoring retail investor sentiment closely within the major markets of Europe for some time by conducting an Investor Confidence Survey. This first began in London in the early 1990’s with the publication of a UK Investor Confidence Index. In Asia, a similar Investor Confidence Index has been launched by the firm in Japan and Taiwan and has been well received by local investors.

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For further information please contact
Daniel Chui, Head of Investor Communications
Telephone: (852) 2800 2874
Email: daniel.wc.chui@jfam.com
Issued by JF Asset Management Limited

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Notes to Editors
JF Asset Management (“JFAM”) forms a key part of JPMorgan Asset Management Holdings Inc. and is the descriptive name used for our asset management businesses in Asia ex-Japan. The brand name “JPMorgan Asset Management” covers the asset management activities of JPMorgan Chase & Co. globally.

JPMorgan Asset Management is part of J.P. Morgan Chase & Co. and is a global asset management leader providing world-class investment solutions to clients. With US$1.1 trillion in assets under management (the Asset Management client funds of JPMorgan Chase & Co. as at 31 March 2007) and offices in 40 locations around the world, JPMorgan Asset Management offers global coverage with a strong local market presence, and leadership positions in most asset classes.

Commitment to Hong Kong
JFAM’s fund management business has remained headquartered in Hong Kong throughout the past three decades and today has more than 450 employees based in this location. Since its formation, JFAM has established itself as one of the largest local portfolio managers in Hong Kong with over US$34billion (31 March 2007) of funds managed locally.

As part of a major global investment group, we are committed to providing specialist teams with the resources needed to deliver successful products and performance to our clients. The Hong Kong-based Pacific Regional Group, together with the local presence of the Global Portfolios Group, form the core of JFAM’s investment management operations. In addition to the knowledge and experience of our individual investment professionals, the stability of the team has enabled JFAM to develop strong relationships with local clients.