2015 Global Investor Sentiment Survey KEY INSIGHTS & FINDINGS HONG KONG

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1 KEY INSIGHTS & FINDINGS HONG KONG

2 Hong Kong findings How are investors feeling about their financial prospects in today s complex, global economy? For the past five years, we ve fielded our Global Investor Sentiment Survey to find out. This annual survey explores investor attitudes and expectations as they consider the year ahead. We have uncovered a resilient optimism among the world s investors since our survey was first fielded in But this optimism is tempered by a sense of uncertainty, which may be keeping some from investing to support their long-term goals. Has investor sentiment turned following a mixed year for financial markets? Or do investors see opportunities on the horizon? Our survey results shed light on these questions, and more. 502 Hong Kong Respondents 37 Average Age HK$ 1,716K Avg. Investable Asset Level HK$ 702,000 Avg. Household Income 2

3 Key Insights Hong Kong 1 Hong Kong investors optimistic on local stock market performance 2 Home country bias still a trend for global and Hong Kong investors 3 Hong Kong investors willing to take more risks 4 Concerns remain on the global economy and China s slowing growth 5 Hong Kong investors use short timeframe to evaluate investment success 6 Fund performance most important when investing in mutual funds 3

4 1 Hong Kong investors optimistic on local stock market performance Perception of 2014 stock market performance is positive in the majority of countries globally. For 2015, 55% of Hong Kong investors expect the market to go up. The percentage has decreased compared to 66% in Despite the decrease, the survey indicated that 82% of Hong Kong investors are optimistic or very optimistic about reaching their financial goals, indicating a relatively positive market atmosphere. HONG KONG INVESTORS TYPICALLY POSITIVE ABOUT THE STOCK MARKET % 14% 41% 41% 27% 33% 14% 10% 3% 3% Down Significantly Down Slightly Essentially Flat Up Slightly Up Significantly 4

5 2 Home country bias still a trend for Hong Kong and global investors 38% respondents believe Hong Kong will provide the best equity returns in 2015, a significant increase from last year (32%). The rest believe that opportunities are in the global markets. When forecasting trends over the next ten years, Hong Kong investors believe that Asia continues to offer better opportunities (42%). Among the four regions included in the survey, investors in Asia Pacific are the second most-likely to believe their home countries would offer the best equity returns in the year ahead. HOME COUNTRY BIAS STILL A TREND FOR HONG KONG AND OTHER REGIONS % of investors who choose home country for best equity returns % US & Canada 24% Europe 38% Hong Kong 18% Latin America 42% APAC 5

6 3 Hong Kong investors willing to take more risks In 2015, 43% of Hong Kong investors feel that it is important to beat the market when it s up, up from 35% compared to One third of investors feel losing less when the market is down is important (32%), less than last year s 38%. 42% of respondents indicated that they will take a slightly or much more aggressive approach in their investment strategy this year. Hong Kong ranked no. 2 in Asia and among top 3 globally in regard to aggressiveness of investment strategy. HONG KONG INVESTORS TO TAKE MORE AGGRESSIVE APPROACH Investors indicate which is more important to them 36% 43% 38% 32% 25% 25% Matching performance of the market Losing less than the market when it's down Beating the market when it's up 6

7 4 Concerns remain on the global economy and China s slowing growth 36% of Hong Kong investors are most concerned about the global economy in 2015 when investing, while 34% are concerned with the Eurozone debt crisis. Slowing growth in China ranked third (33%) as investors take advantage of the Stock Connect program and would hope for China to remain financially vibrant. Other factors they consider when investing are state of the local economy, inflation and rising interest rates. HONG KONG INVESTORS SHARE THEIR CONCERNS The state of the global economy Eurozone debt crisis Slowing growth in China The state of the local economy Inflation Rising interest rates 36% 34% 33% 31% 28% 27% 33% Will China economy slow down? Government fiscal policy Unemployment General market volatility Deflation Falling oil prices 19% 17% 15% 15% 13% 27% Will interest rate increase? None of the above 4% 7

8 5 Hong Kong investors use short timeframe to evaluate investment success Over two-third of Hong Kong investors (76%) evaluate the success of the investment in less than 2 years, ranked top among other countries in Asia Pacific and globally. When evaluating investment success, U.S. / Canada investors are more willing to wait longer in general; one-third of investors evaluate success in 3 to 5 years. Investors in Latin America and Asia Pacific typically use a shorter time period to evaluate success (less than 2 years). PORTION OF INVESTORS WHO EVALUATE INVESTMENT SUCCESS IN LESS THAN TWO YEARS Hong Kong 76% Asia Pacific 64% U.S. / Canada 38% Latin America 75% Europe 55% 8

9 6 Fund performance ranks most important when investing in mutual funds When purchasing mutual funds, excellent and consistent fund performance is the main attractor to Hong Kong investors. When purchasing dividend-paying funds, performance and track record is most important (48%) while dividend yield comes in second (31%). When asked to rank top 3 in importance, dividend yield ranked first (91%) among fund performance and track record, frequency of dividend distribution and fund management team. We are surprised to see that 33% of investors do not know the percentage that are paid out of capital for dividend paying funds, displaying a lack of knowledge in capital dividend payout. FACTORS TO CONSIDER WHEN INVESTING IN MUTUAL FUNDS Excellet and consistent fund performance 45% Low management fee 35% Prudent investment strategy 27% Advice from friends, families or colleagues Not interested in mutual funds / currently do not own 22% 20% Star fund managers 17% 9

10 Survey Methodology The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 11,500 individuals in 23 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia Pacific; France, Germany, Greece, Italy, Poland, Spain, Sweden and the U.K. in Europe, South Africa, the UAE, and the U.S. and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America, Asia (except for Japan) and South Africa and 25 and older in Europe, Japan, the UAE, Canada and the U.S. Respondents were required to own investible assets such as stocks, bonds, mutual funds, etc. In addition, a minimum investable asset threshold was set for each country to ensure that the respondent had sufficient investments which would provide a knowledge base to answer the survey questions. Surveys were completed from February 12 to March 2, 2015, in all countries. HONG KONG RESPONDENT DEMOGRAPHICS Average investable asset level Average household income HK$1,716,000 HK$702,000 Working with financial advisor / professional 48% Average age 37 years Gender - Male 48% Female 52% Marital status Married 55% Living as married 6% Single 37% Separated / Divorced / Widowed 2% Education Secondary school or less 12% College / University 58% Postgraduate or higher 32% 10

11 Survey Methodology Employment status Full-time 94% Part-time 1% Self-employed 2% Homemaker 1% Retired 1% Average # in household 3 people Children under 18 in household 44%

12 Franklin Templeton Investments Gain from our Perspective At Franklin Templeton Investments, we re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe. Focus on Investment Excellence At the core of our firm, you ll find multiple independent investment teams each with a focused area of expertise from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification. All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results. cultural nuances, and share their best thinking across our global research network. Strength and Experience Franklin Templeton is a global leader in asset management serving clients in over 150 countries. 1 We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services. Global Perspective Shaped by Local Expertise In today s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and 1. As of 12/31/14; investors represented by total number of shareholder accounts.

13 Franklin Templeton Investments (Asia) Limited 富蘭克林鄧普頓投資 ( 亞洲 ) 有限公司 17/F, Chater House 8 Connaught Road Central, Hong Kong Investor Hotline (852) IMPORTANT LEGAL INFORMATION Franklin Templeton Investments (Asia) Limited is the issuer of this report. This report does not constitute investment advice or an invitation to apply for securities. Investors should seek professional financial advice and obtain a full explanation of any proposed investment before making a decision to invest. Investments involve risks. The value of investments can go down as well as up, and investors may not get back the full amount invested. Distribution of this report may be restricted in certain jurisdictions. This report does not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution or offer is not authorized or to any person to whom it is unlawful to distribute such a report or make such an offer or solicitation. This report, which is for informational purposes only, sets forth our views as of the date published. The underlying assumptions and these views are subject to change. There is no guarantee that any forecasts expressed will be realized. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from use of this report or any information, opinion or estimate herein. This report has not been reviewed by the Securities and Futures Commission of Hong Kong Franklin Templeton Investments. All rights reserved. GISS B 02/15