2019 Equity Poll Results: Boom or Bust?

After a volatile 2018, FinanceAsia polled investors in the region, asking questions ranging from their biggest fears for 2019 to the role of ESG in investor portfolios.

As we kick off 2019, equity capital markets have had time to digest what has been a tumultuous 2018 for investors in the Asia-Pacific region. But what is the outlook for the new year?

With globalisation and liquidity on the retreat after years of unprecedented expansion, the question is perhaps a particularly tough one to answer this year.
As the bosses of Jefferies Financial Group put it in a letter to clients last week: "This turn of the year feels a little different to us and for many reasons [as] the foundation doesn’t feel as firm, the future doesn’t feel as certain and optimistic, and the path forward does not seem as clear." 
"The markets are extremely volatile and virtually impossible to anticipate or navigate but unlike other turbulent periods, the reasons why are not obvious," Jefferies' president Brian Freedman and chief executive Rich Handler said.

We nonetheless asked readers to highlight the potential success stories of 2019 and what could continue to weigh down investor sentiment.

For our inaugural year-ahead equity poll, conducted between November 16 and December 14, we received responses from 82 investors. Asset managers and insurance companies were the most represented, comprising 44.7% and 21.1%, respectively, followed by family offices on 9.2%.

In terms of assets under management, 30.3% of our respondents held assets ranged between $1 billion and $9.9 billion while 26.3% held assets in excess of $10 billion.

By country, institutions based in China and Hong Kong dominated, with 21.1% investing in China and 26.7% investing in Hong Kong. The Philippines was the next most popular investment destination with a 7.9% share.


Looking ahead, macro issues unsurprisingly dominate the concerns of our respondents.

The trade war between China and the US came out top as the greatest risk for equity markets in the region, with 77% of respondents citing it as their number one concern.

Despite the current 90-day truce, and signs the trade negotiations between the two economic superpowers have turned more positive, fears that the talks will be derailed or that no comprehensive deal will be reached weigh heavily on investor sentiment.

Closely linked to the trade war and second in our poll of concerns is the continuing slowdown in the overall Chinese economy, with nearly 55% of respondents listing it as the second-most worrying trend going into the new year.

That contrasts with the views of strategists at Bank of America Merrill Lynch, who see slowing Chinese growth as the biggest concern in the next few months but who also play down the prospects of a tariff war.
The thing to look out for in their eyes is policy stimulus by Beijing because once that is rolled out, the Chinese stock market could bottom.

The possibility of a downturn in corporate earnings and tightening monetary conditions, driven by expectations for further US interest rate hikes, were cited as the next big fears by our survey respondents.

What are your top 3 biggest concerns for 2019?

Investors were bearish about the outlook for the US stock market, as represented by the S&P 500 Index.

Over 60% of respondents felt the S&P 500 would likely fall by more than 10% over the next 12 months, with only 11.8% not anticipating a substantial correction in the next three years.

Within what timeframe do you think the S&P 500 Index will fall by more than 10%?

There is a more positive feeling about markets closer to home, with increases of up to 10% seen for the Hang Seng, Nikkei 225 and Straits Times indices by between almost a third and just over half of respondents. But it’s not a uniform view with between 26.3% and 29.7% of those surveyed indicating that they expect a downturn of up to 10% in these indices.

In a note, strategists at Ashmore Group said they expect some of the key concerns that have weighed on emerging markets in 2018 to dissipate in 2019 and in some cases even reverse. 
"This should enable emerging markets to re-establish themselves as a prime destination for capital that was temporarily lost to the US," wrote Edward Evans in the firm's annual outlook.
But then, as a specialist emerging markets investment manager, Ashmore's glass is always more likely to be half-full than not when it comes to emerging markets.


When it comes to regional markets that our readers feel are currently undervalued, there is one clear standout from the poll: Vietnam.

Vietnam was picked by over a quarter of respondents as the market best placed to rally the most in 2019. China is second on 21%, with Japan and India lagging behind in third and fourth. 

Interestingly, Singapore was seen having the weakest upside potential, with just 2.7% of respondents choosing the island state.

Which stock market do you see rising most in 2019?

China’s relatively high ranking, in spite of its trade war and a slowing economy, may well be influenced by the changes to the benchmark MSCI Emerging Markets Index that are scheduled to take effect in May this year and in August 2020.

With the number and weighting of Chinese index constituents set to rise, 32.9% of respondents indicated they would be making more use of Hong Kong’s Stock Connect to tap into the China market.

Almost three-quarters of respondents described the MSCI factor as either positive or neutral for their portfolios.

As MSCI gradually increases the number and weighting of China stocks, you see this as:

For all that, more than half of respondents said they were unsure they would use the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect schemes more or less to buy more stocks, while almost 10% said they would use them less.

In 2019, you will:


Given the technology sector’s rollercoaster ride in 2018, it is perhaps unsurprising to find that just 12.4% of respondents expect to increase their listed tech exposure in 2019. That said, a slight majority of those surveyed expect tech stocks to rebound rather than fall this year.

Conversely, healthcare is strongly tipped, with 20% of respondents telegraphing their plans to go overweight the sector and just 6.3% looking to rein in their exposure.

Energy stocks are less fancied with 17.1% of respondents indicating that they will decrease their exposure to the sector in 2019.

In which sector will you A) become more overweight or B) become more underweight in 2019?

With the changes enforced by the European Union’s Mifid II regime coming into full force at the start of 2018, over one-third of respondents said that they would be cutting the number of external research providers they use in the coming year. Almost 45% said they would keep, or increase, the same number of providers this year.

Given rising costs under Mifid II, you will in 2019:

Goldman Sachs narrowly beat off competition from Morgan Stanley and JP Morgan to claim top spot as the Asian equity research provider most preferred by the poll’s respondents.

Rank your top 3 preferred external research providers for Asian equity research.

But when it came to best equity trading execution, Citigroup and JP Morgan were neck and neck at the top of the rankings, with Morgan Stanley and UBS in third and fourth, respectively.

Rank your top 3 preferred service providers for equity trading execution.

The poll results also show environmental, social and corporate governance (ESG) criteria gaining more prominence in Asia, with 37.8% of respondents saying they plan to increase their ESG investments in the new year.

Will your ESG investments increase in 2019?

The most common reason cited for incorporating ESG principles into their investments is to encourage more positive behaviour among corporations, but with 22% highlighting increased regulatory requirements as the main factor, some investors are arguably still only doing so because they have to.

What are the top reasons to incorporate ESG principles into your investment strategy?

Still, with further pressure being applied by investors on the ESG credentials of companies as we enter 2019, the ESG trend could become one of the major factors influencing sectoral investment decisions in Asia.

FinanceAsia would like to thank all of our readers who responded to the survey, and we look forward to observing how these predictions for 2019 will play out throughout the year.

¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media