Pandemic-led challenging economic conditions have led Southeast Asian retail investors to eye for investments in high-risk asset classes, suggests a recent study published by Schroders.
According to the study, 40% of investors from Southeast Asia (SEA) markets (37% globally) are exhibiting riskier investment behaviour. This trend was more prominent in SEA nations like Thailand (42%), Indonesia (40%), Singapore (40%) and Malaysia (38%).
The respondents surveyed were more willing to allocate to high-risk asset investments in pursuit of higher returns, even as most will allocate more to savings or low-risk investments. Besides Covid-19-led economic uncertainty, a low-interest-rate environment coupled with concerns caused by rising inflation have made riskier investment choices more compelling, the analysts said.
“Our research indicates that many people feel they now have to take on more risk in pursuit of returns given the current pandemic,” stated Lesley-Ann Morgan, Head of Multi-Asset Strategy at Schroders.
In addition to that, 56% of the SEA respondents (versus 53% globally) said they would make higher-risk investments when presented with a zero or negative interest rate scenario. In overall Asia, 59% of investors said they were most likely to make higher-risk investments under low-interest-rate conditions, compared to the US (53%) and Europe (49%).
Respondents showed high-risk appetite behaviour, despite the fact that 68% of SEA investors (63% globally) agreed that ‘investment performance impacts their mental health.
Overall 42% of investors out of Thailand, responded that they would allocate investments towards high-risk assets following the lifting of lockdowns, while 24% said that they allocate less. About 40% of investors out of Singapore and Indonesia each, and 38% of overall respondents from Malaysia, agreed to the same statement.
As far as age groups are concerned, respondents showed a different inclination towards risky investments. In Indonesia and Singapore, younger investors are more likely to invest in high-risk assets, the report said. However, Malaysian investors in their 38-50s would invest in higher-risk assets to pursue greater returns. And the older generation of Thailand based investors said they were keener to take on risks.
The craze for Emerging sectors
A considerable number of the surveyed investors responded that they invested in higher-risk asset classes from emergent sectors like electric vehicles, cryptocurrencies and biotech, for the first time in 2020, in pursuit of returns.
Where electric vehicle (EV) related stocks and cryptocurrencies jointly ranked first (28%), biotech or pharma funds came in at third spot (26%), followed by internet and tech stocks in the fourth position (25%).
Furthermore, Schroders noted that 46% of Southeast Asian investors (versus 33% globally) were considering high-risk growth cryptocurrencies.
SEA investors also showed high interest in internet and technology stocks (63%) over the past year, but the high rate of investment in precious metals (60%) showed that their outlook is not necessarily bullish. In the meanwhile, 59% of respondents showed interest in real estate investments.