Channel Islands’ investors ‘dash for cash’ as emerging markets appear to lose their appeal

| October 23, 2012 | 0 Comments
Nicholas Boys Smith, Lloyds TSB International Wealth

INVESTORS in the Channel Islands are responding to ongoing volatility in financial markets by holding more cash, according to research conducted by Lloyds TSB Private Banking.

For the first time, the bi-annual Investor Outlook Survey by Lloyds TSB Private Banking included investors in Guernsey and Jersey and questioned them on their investment strategies, their thoughts on the local, UK and global economy and sought to understand more about their approach to savings.

‘The Investor Outlook Survey is a comprehensive piece of research which shows in-depth insight into the way investors are thinking, the reasons behind their decisions and their thoughts on issues impacting the economy. It’s fantastic that this now includes investors in the Channel Islands,’ said Nicholas Boys Smith, director, Lloyds TSB International Wealth.

The survey reveals that 31% of Jersey investors and 35% in Guernsey have increased their cash allocation in the past six months compared with 10% in Jersey and 20% in Guernsey who have decreased it. This compares with 26% of UK investors who had increased their cash allocation and 14% who had decreased it. Over the next six months, 26% in Jersey and 29% planned to further increase their holding compared with 8% in Jersey and 10% in Guernsey who plan to reduce the amount of cash they hold.

The research shows that around a third of Channel Islands’ investors, 31% in Jersey and 39% in Guernsey, believe emerging markets have a positive outlook for the next six months and half believe its outlook is neutral. China, India and Brazil are recognised in both islands as markets which potentially offer the highest returns but, despite that, 67% in Jersey and 57% agree that emerging markets are generally too risky.

Investors were asked which global issues they think will be of greatest concern over the next six months with the top three concerns being Eurozone debt and the outlook for the Eurozone, slowed economic recovery in the UK, and US debt. Around three-quarters, 71% in Jersey and 77% in Guernsey, are very concerned or quite concerned about the Eurozone debt and the outlook for the Eurozone; 67% in Jersey and 59% in Guernsey are very concerned or quite concerned about the economic recovery in the UK; and approximately a third in each island are very concerned or quite concerned about US debt.

Over the coming year, the main concern that investors have about their investments is Greece leaving the Eurozone with 43% in Jersey and 41% in Guernsey saying this is an issue. About a fifth in both islands, 22% in Jersey and 23% in Guernsey, say the economic growth in the UK is a concern, deflation concerns 29% in Guernsey but only 8% in Jersey, and 22% in Jersey are worried about market volatility compared to just 8% in Guernsey.

‘Investors definitely seem to be battening down the hatches – holding more cash and being wary of the emerging markets which they deem to be risky. Understandably, many have been sensitive to the continued shocks that have shaken the financial markets and are opting for a “safety first” approach,’ said Mr Boys Smith.

‘What is important for investors to remember is that the time-tested approach of long-term and diversified investing must be adhered to, because seeking to eliminate risk can have much worse effects on long-term investment performance than seeking to reduce it. It is at times like this that discussions with qualified financial advisers on the fundamental questions of risk appetite and return expectations will be particularly helpful to investors.’

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