For the first time since it was launched in July 2006, the JF Asset Management Investor Confidence Index shows more skepticism than optimism among local retail investors.

The index, which strives to mirror local investor confidence in the economy, lost 24 points between July and September, falling from 119 to 95 on a 200-point scale.

JF Asset Management's head of retail Terry Pan said that the index falling below 100 reflects a sharp downturn in investor sentiment toward the stock market and the global economic environment.

Five out of the six sub-indexes were worse-than-neutral. Only the sub-index representing the outlook for the Hang Seng Index stayed above the average, at 110.

Pan said that there is still a positive sign in the market, as 43 percent of the respondents expect an increase in the Hang Seng Index in the next six months from the current depressed level.

And 26 percent of investors believe the index will exceed 20,000 by the end of this year. The proportion, however, shrank significantly compared with the previous survey, when 91 percent of respondents believed a significant rebound was coming.

Pan said the global economy will remain volatile next year, but he suggested that investors keep their eyes on the medium- to long-term growth opportunities in Asian markets.

JF Asset Management Head of Investment Services Geoff Lewis believes the gross domestic product (GDP) growth of the US and European countries will recede to 0.5 percent next year.

In contrast, the mainland can maintain its growth momentum with an estimated GDP growth of over 7 percent next year, he said. Geoff said he believes the mainland will continue to act as a growth vehicle for Asian economies.

He said that the central government has sufficient reserves to stave off the global downturn, suggesting it can lower banks' reserves adequacy ratio and interest rates, push forward infrastructure projects and loosen the grip on the property market to spur economic growth.

(HK Edition 10/17/2008 page3)