Hong Kong investors expect 1.9% lower returns compared to Asian peers

Expectations amidst investors were still 0.3% higher than the 9% forecast in 2017.

Hong Kong investors expect annual returns of 9.3% from their portfolios over the next five years which is slightly lower than compared to their global peers (9.9%) and significantly lower than their Asian counterparts (11.95), according to Schroders’ Global Investor Study 2018.

Despite the low expectations amongst Hong Kong investors, the overall anticipated annual returns exceeded the 7.9% per annum generated by the Hong Kong stock market based on the MSCI index five-year average annual returns, the report found.

“This suggests that Hong Kong investors are still over optimistic on their investments,” Schroders said in its report.

The study also found that those who considered themselves as ‘seasoned investors’ were more likely to have higher expectations in their returns.

“Hong Kong investors who judged their level of investment knowledge to be ‘advanced/expert’ expect returns of 11% per year, over the next five years,” Schroders explained. “Their expectation is higher than investors who considered their level of investment knowledge to be beginner/rudimentary (8.3%) and intermediate (9.1%).”

At a country level globally, investors in Indonesia on average were found to expect the highest returns at 16.8% a year. Expectations in other emerging countries were also high including Brazil, China, Thailand and India with investors all looking for average annual returns in excess of 13% between 2018 and 2023.

Whilst trade tensions and softer tech demand may impact Asian economies and hamper growth going into 2019, a peak in US rates and tightening cycles may mitigate negative effects.

“We expect the US dollar to weaken in 2019 which could be the silver lining for more growth and less inflation across emerging markets,” Schroders chief economist Keith Wade said in a statement.

Meanwhile, factors such as asset allocation, access to multiple sources of return, active stock selection and risk management will be critical for investors amidst a challenging future environment.

“As interest rates normalise and quantitative easing unwinds, we think there will be a greater focus on the reliability of corporate earnings as market volatility increases,” Schroders global head of product and solutions Charles Prideaux said in a statement. “We believe returns from market indices will also be lower and therefore there will be greater need for active fund managers who can generate alpha in the period to come.”