Pimco Says Asian Clients More Worried About Returns Than Fed

  • Survey finds most plan to invest more in Europe, Japan stocks
  • `Asian investors’ concerns have shifted over the past year'

Pacific Investment Management Co. said investors in Asia are more concerned about the returns on their investments than the prospect of higher interest rates in the U.S. as global growth slows, according to its annual survey of distribution partners.

About 80 percent of investors in the region surveyed plan to boost their investments in European and Japanese stocks, Newport Beach, California-based Pimco said in a report. About 70 percent of the respondents are seeking to invest more money in liquid alternative investments, according to the survey.

Returns are likely to be depressed since Asia won’t be immune to slowing global growth, which is set to be “low” in the coming years, Michael Thompson, head of Pimco’s Singapore office and wealth management in Asia outside of Japan, wrote in the report. Investors expect rate increases in the U.S. to be gradual and “well telegraphed,” ending at a lower level than in previous tightening cycles, according to the report.

Shifting Concerns

“Asian investors’ concerns have shifted over the past year,” Thompson wrote. “While potentially rising interest rates in the U.S. were the biggest worry a year ago, our distribution partners are currently more concerned about meeting the return expectations of end-investors and the likelihood of lower returns across asset classes in the future.”

Pimco surveyed 16 of the largest banks in Hong Kong and Singapore, which distribute the manager’s funds to their clients, Thompson said in an e-mail. The firm had $1.47 trillion in assets worldwide as of Sept. 30, of which about 10 percent are managed on behalf of clients in the Asia-Pacific region, he said.

The U.S. Federal Reserve announces its rate decision on Wednesday, with futures traders pricing in just a 6 percent possibility of an increase. The Stoxx Europe 600 Index surged 8.1 percent this month after European Central Bank President Mario Draghi hinted last week that policy makers may add to stimulus measures to stoke growth.

The Nikkei 225 Stock Average has climbed about 9 percent since end-September. The Bank of Japan meets on Friday, with 16 of 36 analysts surveyed by Bloomberg forecasting the central bank will bolster monetary policy.

Equities, Debt

About 56 percent and 31 percent of investors plan to increase investments in Asian stocks and credit markets respectively, according to the report.

Investors are also concerned about bubbles in various markets, the report showed. Pimco surveyed them in July and August, when China’s shares tumbled and the yuan was devalued. China’s economic growth will likely slow to between 5.5 percent to 6.5 percent, from about 7 percent, according to the money manager.

“As China’s slowdown affects the region further, we think investors will remain concerned about the possibility that asset bubbles -- from loans to property -- could deflate suddenly, creating volatility and potentially, losses,” Thompson wrote.

Before it's here, it's on the Bloomberg Terminal.