European investors divided over prospects for global markets
Sentiment amongst European investors is divided between those in Germany and the UK who are expressing more confidence, and those in France, Italy and Belgium who have less, according to a global poll of more than 20,000 individuals in 19 countries conducted earlier this year by Franklin Templeton.
Some 65% of respondents offered a pessimistic view of the global economy, believing it has deteriorated compared to last year, resulting in a move to more conservative investment strategies. Between 50% and 57% of investors in France, Belgium and Italy intend to employ a more conservative approach, compared to 44% in the UK and 41% in Germany, the poll found.
A clear majority (82%) of countries have a neutral to pessimistic outlook on their local economies, but investors in Germany and the UK have more confidence in their home markets until 2013.
Some investors believe their own country will offer the “best investment returns in the next year” (43% in Germany and 34% in the UK), followed by investments in Asia (25% in Germany and 32% in the UK). This is contrary to France, Italy and Belgium where investors expect the reverse, with Asia providing the best investment returns next year, rather than their own countries.
On average, just over half (52%) of investors in Europe believe the annual rate of return for equity and fixed income investments will be greater in emerging markets compared to frontier markets over the next five years. Fifty-six percent of Europeans believe emerging market equities will provide returns of between 5% and 25%, while 48% expect the same returns from emerging market fixed income over the same time frame.
“It is clear that investors in the UK and Germany have a different view to the rest of Europe,” said Jamie Hammond, Managing Director of Europe at Franklin Templeton Investments. “This survey provides interesting insights into investors’ needs, risk appetite and where they see growth potential.”
However, over the longer term, the poll suggests sentiment and intentions are different. Some 44% of investors from around the world expect a rate of return on their investments of 5%or greater in 2012. Considering stocks specifically, 40% expect returns of 5% or greater this year.
But optimism increases when respondents consider a 10-year time horizon, with 50% anticipating that same level of positive annualized return. Globally, while 45% report they have become “somewhat to more” risk averse over the last three years, only one in five respondents would seek to make their portfolios more aggressive this year.