Malaysians prefer to hoard cash

KUALA LUMPUR: Cash-rich Malaysians generally prefer to hold cash or to invest in properties or secured assets, according to a Manu-life Holdings Bhd survey.

“A majority of Malaysian investors were of the view that it is a ‘bad time’ to invest in stocks and equities as the market is volatile, leading to a positive sentiment towards cash, insurance and secured assets with a flavour for fixed income investments,” said Manulife’s group CEO Mark O’Dell at the launch of its Manulife Investment Sentiment Index (ISI) yesterday.

The survey revealed that Malaysian investors were cash-rich with 83% of investors preferring to hold cash.

Manulife Asset Management’s chief investment officer Jason Chong noted that Malaysia has the highest cash asset allocation of 41% compared to Asia’s average of 33% cash asset allocation of total assets.

Chong said only 7% of Malaysian investors invested in unit trusts and equities compared with the region’s average of 18%.

He said cash-rich Malaysians should diversify their investment choices instead of hoarding cash and buying properties. “They need to tap into the other investment opportunities that the Malaysian market has to offer which have higher growth potential or capital appreciation,” said Chong.

O’Dell is of the view that due to the young demographic in Malaysia, the financial priority of most Malaysian investors is to “save for a rainy day” while the priority for their regional counterparts, is to “save for retirement”.

This explains the cash hoarding habits among Malaysians, on top of contributing to the Employees Provident Fund, according to O’Dell.

Manulife president and CEO Robert A Cook said Malaysian investors tend to hold on to fixed income as they believe it will give them higher returns compared to other types of investments.

“Yet there exists the concern that Malaysian investors, who have a high affinity to holding cash and fixed income, may see the value of their savings erode and this may result in a low purchasing power in years to come in view of inflation,” said Cook.

To cater for this concern, Cook suggested that there is a need to initiate and sustain in-depth education on the availability and suitability of various investment products, other than cash, fixed income and their own homes.

The survey revealed that investment sentiment was much better in emerging markets, for instance Malaysia and Indonesia, compared with that of developed countries.

On the regional front, the Manu-life ISI revealed that investors in developed Asian markets believed that it was not the right time to invest, with Hong Kong and Taiwan being the most pessimistic.

The inaugural survey also showed that investors in Malaysia and Indonesia were optimistic about cash and property investment, with little appetite for stock and equities.

According to the survey, 52% of Malaysian investors where optimistic about investing their spare cash to preserve value. However, in developed markets such as Hong Kong and Taiwan, the percentages were -4% and -8% respectively.

Manulife ISI is a quarterly survey measuring and tracking investors’ views across seven markets in the region — China, Hong Kong, Indonesia, Japan, Malaysia, Singapore and Taiwan — on their attitudes towards key asset classes and investment vehicles.

The survey was conducted by TNS, a global research firm, and saw 3,500 respondents across Asia of which 506 interviewees were from Malaysia.

O’Dell noted that the survey had not been influenced by the upcoming general election as it was conducted between mid-December 2012 and late-January 2013.

This article first appeared in The Edge Financial Daily, on April 24, 2013.

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