Taiwan investors' portfolio returns barely match growth in cost of financial goals, limiting ability to growth wealth

Press Release |

Inefficient allocation means Taiwan investors miss opportunities to grow their savings – excessive cash holdings emerge as the key culprit.

Taipei – A new report by Manulife Asset Management finds that for every step forward the average investor in Asia takes toward meeting their main financial goals, many fall half a step back owing to the rising costs of those goals. While Taiwan investors are revealed to be in a better position than most peers, with investment returns essentially matching the growth rate in the cost of their key financial goals, this means their pool of savings is not growing in absolute terms. 

The report, entitled One step forward, half a step back: Meeting financial goals in Asia, is the sixth in Manulife Asset Management’s Aging Asia series. It analyses the five most cited financial goals on a pan-Asia basis – retirement, paying for children’s higher education, meeting current living expenses, purchasing a primary residence and saving for a rainy day (which includes unexpected healthcare costs) – and the saving and investment strategies that investors employ to meet these goals. 

Michael Dommermuth, Executive Vice President, Head of Wealth & Asset Management, Manulife Asset Management, said, “For Taiwan, we highlighted the goals of retirement and purchasing a home. We found that while Taiwan is a relatively wealthy nation and faces a moderate inflation rate, its population is aging rapidly and savings rates are falling, suggesting that financing retirement is increasingly challenging. Meanwhile, housing is an immediate concern for investors in Taiwan, with the cost of residential property having risen 5.9% a year over the past five years.”

Overall, the cost of retirement, education, living expenses, healthcare and residential property in Taiwan has risen an average of 3.0% a year over the past five years while self-reported investment portfolios delivered average returns of 2.7% a year in the same period. This means that average investment returns fall a marginal 0.3% short of the annual increase in the cost of consumers’ key expenses – making Taiwan investors the only ones in Asia (ex-Japan) that are reaping returns that more or less match the cost growth of their financial goals.

According to Dommermuth, “Our research reveals that the key reason Taiwan investors enjoy returns in line with growth in the cost of their goals is that they have the highest level of capital market exposure at 54.5% versus the pan-Asia average of 42.5%. That being said, excessive cash holdings continue to compromise their abilities to grow their savings pools in absolute terms. We found that the average Taiwan investor holds 29.3% of their assets in local currency which delivered a mere 1.0% a year over the past five years.”

Andrew Wang, Chief Investment Officer at Manulife Asset Management (Taiwan), said, “This means that Taiwan investors are actually in a relatively good position to achieve returns in excess of the cost growth of their financial goals. Indeed, we see the opportunity for local investors to enhance their returns by shifting a portion of their cash holdings to more efficient asset classes such as local equities or fixed income. 

“In addition, Taiwan is highly integrated with global financial markets, and local investors have the opportunity to diversify their investments across multiple geographies to access a wider array of opportunities for return. Such asset allocation decisions have always been important, but these days investors need to be more tactical than in the past. Investors could consider a professionally managed dynamic asset allocation solution that can be accessed via a mutual fund or investment-linked insurance platform.”

Manulife Asset Management’s Aging Asia series of reports and related resources can be accessed at: www.manulifeam.com/agingasia.

 

 

Unless otherwise noted, data in this press release is sourced from Manulife Asset Management based on investment returns and cost growth data outlined in One step forward, half a step back: Meeting financial goals in Asia which can be accessed at: www.manulifeam.com/agingasia.

Media Contacts

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Nicole Chien
Head of Marketing Department
9F, No 89, Sungren Road, Taipei, 11073, Taiwan, R.O.C.
nicole_chien@manulife.com 886-2-2757-5969