HONG KONG: Investor sentiment towards the local stock market has recovered to pre-financial-crisis levels, with 30 percent of investors now planning to increase their investment in the next six months compared with only 18 percent at end-March, according to JP Morgan's latest survey.

However, investors still see some volatility in the market as they are mostly unconvinced that the local bourse has entered a bull market phase despite share prices gaining sharply over the last quarter.

Share prices have rebounded over 60 percent from their lows in early March.

"The last quarter has seen a long-awaited recovery in investor confidence," Marco Tang, head of intermediary business at JP Morgan Asset Management, told reporters yesterday at a press briefing to explain the results of the investment firm's quarterly investor confidence survey.

The JP Morgan Investor Confidence Index rose to 119 at the end of June-the same level seen in June 2008-from 95 in end-March, representing a 25 percent rise.

The latest reading, which surpassed the neutral level of 100, suggests that investor confidence has bottomed out, the investment firm said.

Meanwhile, investor confidence on the local economic environment, the local investment environment and atmosphere, and the global economic environment has also rebounded by 33-37 percent to levels above the neutral level.

With market sentiment improving strongly, investors are starting to enter the markets in greater numbers, the investment firm notes.

Some 30 percent of investors indicated that they would increase their investment in the equity market in the next six months while only 18 percent said the same during the last survey conducted in late March.

"However, we can see investors are still very cautious in the face of market volatility," Tang said.

The survey found 66 percent of investors are seeing a wrestle between the bull and bear for the near term while 22 percent believe that the local bourse is still in a bear phase.

Only 12 percent of respondents believe that the local bourse has entered a bull market.

Nonetheless, most investors are optimistic about the outlook for the local bourse towards the end of the year with 54 percent anticipating that the benchmark Hang Seng Index will trade between 18,001 and 20,000 points.

Some 20 percent of investors are even more bullish, expecting the index to move between 20,001 and 25,000, while only 16 percent forecast a 16,001-18,000 range.

The index closed yesterday down 0.79 percent at 17,721.07 points.

Meanwhile, JP Morgan Asset Management has a neutral rating on the Hong Kong stock market for the near term, citing stretched valuations.

But it has a bullish outlook for the local equity market for the medium and long term.

"Some significant corrections will provide good buying opportunities," said Grace Tam, vice-president of investment services at JP Morgan Asset Management.

(HK Edition 07/09/2009 page4)