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Expat Investor : October 2008
MARKET VIEWS We make savings simple for you 1 Year Fixed Rate Bond £ Also available * 6 Months Fixed Rate Bond * International 30 6.75% 5.35% € Gross/AER Gross/AER 3.40% $ Gross/AER Download an application form at www.irishpermanentintl.com +44(0)1624 641641 for a personal service Individual product terms and conditions apply. Interest rates are quoted gross p.a. without any deduction of tax. AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. The minimum opening balance is £10,000/€10,000 or US $10,000. Irish Permanent International is a registered business name of Irish Permanent (IOM) Limited which is licensed by the Isle of Man Financial Supervision Commission for Banking and Investment Business. Registered Office: 12/14 Ridgeway Street, Douglas, Isle of Man. IM1 1EN. Irish Permanent International is part of the Irish Life and Permanent plc Group. Fast Facts 88012 Expats speak out on investment opportunities Internaxx’s latest investment survey reveals the investment market sentiments and views shared by expat and international investors. remains far lower at 36%. Indian equities also scored highly, with 69% positive, but again exposure is even lower at 24%. Investors are optimistic about Asia’s economic prospects. 64% of respondents are positive and only 7% negative about both China and India, and 52% are positive about Hong Kong, with 7% negative. However, figures coincide with a rise in concerns over Asian market volatility, up threefold since 2007 to 25%, and corporate governance, which doubled (to 27%) in under a year. This, despite fewer investors citing lack of knowledge about the Asian markets as a reason for non- exposure (35% falling to 28%). Global outlook Overall 73% of investors matched or outperformed the market, down from 86% last year.With twice as many underperforming this year (27%) compared to 2007 (14%) this was the first decline since the first Internaxx survey in 2005 and coincided with a steep increase among those who think markets will become weaker in 2008/09. For the first time in five years, Only one in five expat and international investors are positive about France’s economic prospects for the year ahead, according to a global research study by specialist share dealers, Internaxx,a joint venture between Fortis Bank and TD Waterhouse Bank. Among the industrialised EU economies, Germany’s prospects are rated highest by 35% of investors followed by those of the UK (27%), with France last (21%). Globally, only the US was less popular, at 14%. Marginally more investors are pessimistic about the UK (20%) than they are about France (17%), but only 10% are pessimistic about Germany’s prospects. Positive sentiment towards European equities improved 18 EXPAT INVESTOR ? from 22% in 2007 to 50%, though negatives also rose from 11% to 27%. Sentiment towards UK equities became more polarised than in any previous survey, with far more optimists (45% today up from 14% in 2007) and far more pessimists (36% today, 16% in 2007). Managing Director Robert Glaesener says, “Investors fall into two camps, those that thrive on market volatility, and those with a more cautious style, hence the current climate seems to benefit some and concern others”. Less than half the sample is positive about Middle East equities (44%) and US equities attracted the most negative sentiment of all at 69%. October 2008 Asia Though investors fear the adverse effect of the US’s economic problems on China, in its Olympic year, 46% of investors think China will achieve global superpower status within five years. Only 28% back the US and India came third at 16% with Russia last at 10%. Although economically very optimistic and bullish on the long term, expatriate and international investors remain cautious with their short-term exposures in Asia. Positive sentiment towards Chinese equities rose dramatically in 2008, up from 42% in 2007 to 69%, but this did not result in a commensurate rise in investment. Despite this optimism, the number of investors exposed to China expatinvestor.com investors became more cautious about the evolution of financial markets. In previous surveys, investors always predicted the evolution of the markets accurately. With the prescience that comes from a global outlook, international investors accurately predicted rises in the FTSE All World Index in survey from 2004. Their neutral and positive results of 79%, 46% and 31% accurately predicted rises in the FTSE of 11%, 13% and 13%. Investor optimism regarding China and India since 2004 also matched a consistent rise in the Hang Seng, while their pessimism regards the US was reflected by the S&P500’s 15% drop over the same period. As in previous surveys, investors relied on their own decisions rather than take advice, but by a larger margin than in previous surveys (68% in 2007 to 78% today). To protect themselves against an anticipated drop in markets, international investors are diversifying their portfolios quickly, with a stronger interest in precious metals such as gold, commodities, REITS (more than doubled to 10%), mutual funds (44% to 48%), blue chip shares (36% to 41%), forex (24% from 14%) and small caps. Interest in hedge funds, ETFs, futures and options waned significantly. Property was popular at the start of the year (33% to 48%), with the biggest rise in exposure apparent in the Middle East (5% to 12%), Asia and the UK, though property exposure in Continental Europe dropped significantly (to 11% from 21%). But with 70% now thinking international property is overvalued, more than 50% of investors will review their holdings in 2008/09. The forecast for 2008/09 is for higher oil prices (72%), devaluation in the value of the dollar (63%) and a worsening in the global sub prime crisis (47%). However, more than 70% claim to take the environment into account when investing, with as many people mentioning damage to the environment and growing food prices as threats to the 2008/9 economy as they did the American economy and high oil prices. The proportion of expat investors wanting to retire in their expat market continues to rise, from 62% in 2007 to 68% in 2008. But whereas expats have broadly adapted to the local culture (85%), less than one 1 in 2 claims to have found a good social life and only 44% have found the right education for their children. Only 29% think they have achieved a good work life balance. Internaxx is an international online brokerage service based in Luxembourg, and a joint venture between TD Waterhouse and Fortis. It offers online real time share dealing, FX and derivatives trading to several thousands of expatriate and international investors worldwide. Internaxx can be accessed online at www.internaxx.lu