2012 Global Investor Sentiment Survey Findings

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1 The global economy is complex and ever evolving, which can be a source of optimism and anxiety for investors. The Franklin Templeton 2012 has revealed that in the near term, respondents remain cautious, fairly conservative, and in favor of keeping their investment money close to home. Although respondents were more risk averse than in the past, they reveal positive expectations for investment returns in the future. The survey provides a unique snapshot of global sentiment and attitudes at a critical juncture in the market cycle. Survey Overview Franklin Templeton s was conducted online in February The survey polled 20,623 individuals across 19 countries with a focus on outlook and perceptions of investing within and outside their home countries. The Countries surveyed (representing 70% of the world s GDP 2 ) were: 2 - Asia Pacific (APAC): Australia, China, Hong Kong, India, Japan, Malaysia, Singapore, South Korea - Americas: Brazil, Canada, Chile, Mexico, the United States - Europe: Belgium, France, Germany, Italy, Poland, the United Kingdom Home Country Bias Domestic vs. Global Investing A trend toward home country bias persists. Respondents appear to favor markets they are most familiar with, and have optimistic tendencies toward them. - One-third of global respondents are optimistic about the future of their local economy. In India, respondents were the most optimistic about the future of their local economy (71%), followed by Brazil (64%) and Hong Kong (55%). 44% of Malaysian respondents believe the local economy has improved while 24% believe it has deteriorated. - Given the current market environment, 44% expect their investments to provide positive returns in 2012 (5% to 25%). Respondents in the APAC and Americas regions led the way with 54% and 55%; they expect positive returns of 5% to 25% in the current market environment. - 56% of respondents would invest in their home country next year if they could invest in only one region. In Malaysia, 43% of respondents would invest in Asia next year if they could invest in only one region, followed by 37% would invest in Malaysia only. - Almost 40% think their home country will have the best performance next year. This is more likely for those in the APAC region (45%). In contrast with global results, 59% of Malaysian respondents believe Asia would offer the best return next year, compared to 18% who believe the same for Malaysia. 51% of respondents believe the global economy has deteriorated since last year, with this belief being highest in Europe (65%). - In Malaysia, 31% of respondents believe the global economy has deteriorated while 40% are neutral. The majority (72%) of global respondents have a limited portion (less than 20%) of their portfolios invested beyond their home countries. 1 Canada s survey was fielded March 2-8, Source: International Monetary Fund, World Economic Outlook Database, September Gross domestic product figure based on purchasing power parity (PPP) share of the world total. franklintempleton.com.my 1

2 Yet, looking toward the future, there appears to be a growing willingness to increase global investment allocation. - 19% of respondents would invest in Asia next year if they could invest in only one region, and 28% think this region will have the best performance. - 28% of respondents currently hold 1/5 or more of their investments outside of their domestic market; this number increases significantly to 44% who believe they will invest as much by % of Malaysian respondents have a low percentage (0% to 40%) of investments outside Malaysia, this number will decline to approximately 82% by the end of 2012, and further down to 76% in the next decade. Views on Developed and Emerging Markets Respondents see investment potential in developed markets. - 49% of respondents expect a 5% to 25% return on developed markets equity investments over the next five years and 48% expect the same range of returns on developed markets fixed income investments. - Participants in the Americas hold the strongest view of developed markets investment potential. However, respondents are more optimistic about the investment potential of emerging markets. - 63% of respondents expect a 5% to 25% return on emerging markets equity investments over the next five years and 56% expect the same range of returns on emerging markets fixed income investments. Respondents in the APAC region are particularly bullish on emerging markets over the next five years. - 67% expect a 5% to 25% return on emerging markets equity investments and 62% expect the same range of returns on emerging markets fixed income investments. European respondents are less bullish on emerging markets over the next five years. - 56% expect a 5% to 25% return on emerging markets equity investments and 48% expect the same range of returns on emerging markets fixed income investments. Attitudes toward Risk 45% of global respondents say they have become somewhat to more risk averse over the last three years. - Reflecting this more conservative outlook, only a minority (1 in 5) of respondents would seek to make their portfolios more aggressive this year. - 64% of global respondents report the risk profile of an investment as an important factor when determining how and where to invest. Respondents prefer investments that offer a high level of certainty. - 71% report guaranteed returns as an important factor when deciding how and where to invest. - Yet only 55% think dividends are an important consideration. - In Malaysia, 84% of respondents identify total returns and guaranteed returns are very important factors for making a decision on how and where to invest. About 75% of respondents believe risk profile and dividend are important to consider. 2

3 When looking across various investment types, 52% of respondents consider stocks to be risky, followed by bonds (38%), non-metal commodities (35%), real estate (33%), precious metals (31%) and money markets (30%). - In Malaysia, 62% of respondents consider stocks as somewhat to risky, followed by bonds (41%) and non-metals (40%). 42% of respondents view precious metals as somewhat to not at all risky, followed by money market (38%) and real estate (37%). - The broadest divergence in risk perception occurred with real estate and money markets: Real estate: 51% of respondents in India view this asset class as risky while only 18% of respondents in Germany held the same view. Money markets: 48% of respondents in India view this asset class as risky while only 15% of respondents in Japan and Germany held the same view. Although respondents view stocks and bonds as the most risky investments, they continue to see the potential for both asset classes to generate positive returns over the next 10 years. Fixed Income and Equity Investing Globally, respondents are relatively optimistic about both stock and bond returns over the next 10 years. - 50% of respondents expect a 5% to 25% return on stocks and 46% expect the same range of returns for bonds. Respondents in the APAC and Americas regions are more bullish on stocks and bonds than European respondents over the near and long term. Percent of Respondents Who Expect 5% to 25% Return on Stocks and Bonds: In 2012 In 2022 APAC Stocks 46% 55% Bonds 41% 50% Americas Stocks 46% 58% Bonds 43% 53% Europe Stocks 30% 40% Bonds 28% 37% Asset Class Expectations Performance expectations revealed the most enthusiasm for hard assets. - In 2012 and over the next 10 years, respondents globally expect the best-performing asset classes to be precious metals followed by non-metal commodities. Expectations for real estate performance are also high with 47% of respondents expecting real estate will return between 5% and 25% in By 2022, 57% of respondents expect real estate to return between 5% and 25%. 3

4 Top 3 asset class performance expectations for 2012 and 2022 by country are: Country Australia Belgium Brazil Canada Chile China France Germany Hong Kong India Italy Japan Malaysia Mexico 2012 Expectations Top Three Performing Asset Classes 2022 Expectations Top Three Performing Asset Classes 3. Money Markets 3. Real Estate 1. Real Estate 1. Real Estate 3. Precious Metals 3. Precious Metals 1. Non-Metal Commodities 1. Non-Metal Commodities 2. Precious Metals 2. Real Estate 3. Real Estate 3. Precious Metals 1. Non-Metal Commodities 1. Non-Metal Commodities 2. Precious Metals 2. Precious Metals 3. Money Markets / Bonds 3. Real Estate 2. Non-Metal Commodities 2. Real Estate 3. Stocks 3. Non-Metal Commodities 2. Real Estate 2. Real Estate 3. Money Markets 3. Non-Metal Commodities 1. Precious Metals 1. Non-Metal Commodities 2. Non-Metal Commodities 2. Precious Metals 1. Precious Metals 1. Money Markets 2. Money Markets 2. Precious Metals 3. Non-Metal Commodities 3. Non-Metal Commodities 2. Real Estate 2. Real Estate 3. Non-Metal Commodities 3. Non-Metal Commodities 4

5 1. Non-Metal Commodities 1. Non-Metal Commodities Poland 2. Precious Metals 2. Precious Metals 3. Bonds 3. Real Estate Singapore 2. Non-Metal Commodities 2. Real Estate 3. Real Estate 3. Non-Metal Commodities South Korea 3. Money Markets 3. Stocks United Kingdom 3. Money Markets 3. Real Estate United States 3. Money Markets 3. Stocks Country rankings for asset class performance expectations are based on the mean return values. The Value of Professional Advice About 2/3 of global respondents believe advice from a financial professional is important when making equity purchase and sell decisions. - A larger percentage of respondents in the Americas hold this belief (75% for purchase decisions/74% for sell decisions), especially those from Brazil, Chile and Mexico. - European respondents are less likely to hold this belief (57% for purchase deciscions/56% for sell decisions), particularly those from Germany. - In Malaysia, 79% of respondents view advice from a financial advisor s recommendations as important factors leading to investment decisions, followed by family (57%) and friends (47%). Globally, respondents appear to see themselves as more important than financial professionals when it comes to making decisions about retirement planning. In fact, 81% reported themselves as important, while just under 50% reported financial professionals as important. There is a marked difference in the opinion of respondents in developed markets and emerging markets. For example: - In Germany, only 31% of those surveyed view financial professionals as important to retirement planning. - In India, 67% of respondents view financial professionals as important to retirement planning. Survey Methodology The 2012 Franklin Templeton included responses from 20,623 individuals in 19 countries: Brazil, Chile, Mexico, Canada and the US in the Americas; Australia, China, Japan, Hong Kong, India, Malaysia, South Korea and Singapore in APAC; and Belgium, France, Germany, Italy, Poland and the UK in Europe. The survey was designed in partnership with Dan Ariely, a professor of psychology and behavioral economics at Duke University and conducted online by Qualtrics. Respondents were selected from among those who have volunteered to participate in online surveys and polls and all were 18 years of age or older. Surveys were completed from January 30 to February 13 in all countries except Canada where the survey was completed from March 2 to 8. In general, gender distribution was representative of the larger population of each country, as were marital status, education and age. 5

6 Important Legal Information Survey commissioned by Franklin Templeton Investments in partnership with Dan Ariely of Duke University and conducted online by Qualtrics, February The survey was conducted online in the Australia, Belgium, Brazil, Canada, Chile, China, France, Germany, Hong Kong, India, Italy, Japan, Malaysia, Mexico, Poland, Singapore, South Korea, the United Kingdom and the United States. A minimum of 1,000 adults per country were surveyed, 20,623 in total. Copyright Franklin Templeton Investments. All rights reserved. This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of any of the Franklin Templeton Investment Funds. Nothing in this document should be construed as investment advice. Menara Keck Seng 203 Jalan Bukit Bintang Kuala Lumpur Malaysia Fax: (603) (603) franklintempleton.com.my 2012 Franklin Templeton Investments. All rights reserved. GISS WTEMPA4 04/12 6