What investors expected and what occurred in 2012. The title is typical to see at the end of a year (2012 in this case). However, this new report from Jahanzeb Naseer an analyst at Credit Suisse Asia is extremely interesting The firm polled investors last year which markets they expected to outperform, what were the biggest risks etc. and what happened. Value investors (or contrarian investors) will not be surprised that the outcome was not only wrong but almost the exact opposite of what investors expected. Data and charts from this insightful report can be found below:
Markets: China (H shares) and Hong Kong were the favourites, while Japan and India were expected to underperform
Every year, Credit Suisse (CS) surveys participants for their views on the markets and then analyze the results prior to the next Asia Investment Conference (AIC). Last year, CS had close to 3,000 attendees. This provided with a unique opportunity to use real-time voting technology to canvas the participants’ views on risks, markets and how they are positioned.The 16th AIC will be held from the 19th of March in Hong Kong.
What investors expected would be the best and worst performing markets of 2012
Crowd sentiment tends to be a contrarian indicator, even when the crowd is constituted of sophisticated investors. Last year, AIC participants were polled at a time when the eurozone crisis was starting to re-emerge and the market had done well in 1Q12. Participants were bullish on China, Hong Kong, Australia and Indonesia.
Australia was the only market out of these that made it to the top three and Indonesia came at a respectable five; China and Hong Kong did not do that well.
The markets on which investors were most underweight— Japan, India and Pakistan—actually ended up being among the best performing for the year.
Sectors: What investors expected would be the best and worst sectors of 2012 and what actually occurred
Consumer discretionary and Financials sectors were the favourites to lead returns last year: these sector picks did perform better by landing in the upper half among nine sectors. At the other end, investors had expected Utilities and Materials to be the worst performers though they landed in the middle of return charts for performance since the last AIC.
What investors expected would be the biggest threat and most 'risky' and what really was
CS notes that participants were much better at picking the key risks for 2012. They asked what would be the risks in both 2012 and 2013. While investors did not think that “resurgence of inflation” posed a big risk in 2012, they did expect it to be a possible concern for the markets in 2013.
Participants picked “European sovereign debt” as one of the biggest risks for 2012 but were optimistic of the risk getting resolved by the end of year and hence, did not consider it to be a major risk in 2013. Investors thought that “rising oil prices” was a major risk in 2012 and will continue the same in 2013.