Investors put faith in foreign markets

Despite 60 percent of investors saying they expect their country’s stock market to be up in 2013, research from Franklin Templeton Investments shows two thirds ‘now expect the best equity and fixed-income opportunities will be found outside their home market this year.’

While confidence in home markets remains generally high in most regions, investors in emerging markets are most optimistic, with 66 expecting their local stock market to improve, compared with 58 percent in developed markets.

European investors voice the least optimism in their home markets – only 43 percent feel very optimistic or optimistic about their national stock markets – according to the investment manager’s 2013 Global Investor Sentiment Survey, though Europeans do expect 2013 to be an improvement on the previous year. Instead, investors in the struggling eurozone see Asia as offering the best prospects. 

It’s not just European investors who see Asia as a good investment, though. Globally, Franklin says 28 percent of investors believe Asia will offer the best equity return in 2013, while 33 percent see the region as the best bet over the next 10 years.

But despite the perceived opportunities for growth elsewhere, three times as many European investors will take a conservative approach in 2013 as plan to adopt an aggressive strategy.

‘Despite an overall tendency toward more conservative investing, European investors recognize the opportunities of investing abroad,’ says Jamie Hammond, managing director for Europe at Franklin, in a press statement. 

‘Their top concern about investing in other countries, however, is lack of knowledge, followed by concern that other markets are riskier and the impact of exchange rates on investment returns. It appears that avoiding loss, rather than achieving higher returns, is still a top priority.’

Wylie Tollette, director of performance analysis and investment risk at Templeton, warns that ‘many investors need to rethink risk and focus on the long term’. 

‘Risk avoidance and risk management are two different things,’ he explains. ‘Trying to avoid short-term risk and volatility entirely may expose investors to other kinds of risks, such as inflation and the impact of rising interest rates. These longer-term risks can negatively affect their ability to meet their financial goals.’