Coverage of high-potential mid-market firms in Poland

Advisory article

Interview with Franklin Templeton's regional director for CEE

 Michał Staszkiewicz, Regional Sales Head for Poland, Romania, Russia and the Baltics, Franklin Templeton Investments

 Please give us a bit more detail on the survey.

 In its fifth year canvassing investors across the globe, the 2015 Franklin Templeton Global Investor Sentiment Survey (GISS) polled over 11,500 investors in 23 countries across the Americas, Africa, Asia Pacific and Europe. One of the broadest surveys of its kind, respondents shared their views and current attitudes towards investing and their expectations for 2015 and the decade ahead.

 The 2015 GISS included 500 respondents from Poland, and marks the fourth-consecutive year for the survey here, with sentiment broadly optimistic, albeit slightly reduced when it comes to the local stock market in 2015, relative to last year.

 What is the prevalent mood about Poland?

 This year’s survey reflects a bearish outlook for the local stock market’s performance in 2015, with a decrease in the number of Polish investors who think the local stock market will increase this year. In 2014, 61 percent believed the market would be up in 2015, while this year that number dropped to 47 percent.

 Indeed, when it comes to perceptions of past performance, the survey has consistently shown that global investor perception often diverges from reality. This year’s survey showed more than half (55 percent) of global investors believe their local stock market was up last year. When looking at where global stock markets ended the year, 60 percent missed the mark. Only eight of 23 markets surveyed (35 percent) experienced positive performance in 2014. In Poland 36 percent believe that the stock market was up last year. In fact, the MSCI Poland index returned -13.60 in 2014.

 Poland has historically had a strong home-country bias. Do you see this trend shifting?

Polish investors do certainly have a heavy home bias, but interest in foreign funds from investors in Poland is certainly on the rise. We are clearly noticing that investors are increasingly taking a global view.

 This year’s survey has thrown up some interesting results. While local equity market sentiment has dropped for Polish investors from 31 percent in 2014, sharply declining to 22 percent in 2015, they have increasingly been looking to other markets for other investment opportunities. Indeed, Polish investors are more likely to view Western Europe and Asia as better investment opportunities this year. Western European equities saw a doubling of interest from 12 percent in 2014 to 24 percent in 2015, whilst interest in Asian equities rose slightly from 20 percent in 2014 to 21 percent in 2015. We believe that these are signs of a maturing market and hope to see a larger number of investors looking to diversify their portfolio to include other countries or regions in the coming years.

 What about fixed income?

 On the fixed-income side, although Polish investors still believe Poland will produce the best fixed income returns in 2015 (31 percent), this has noticeably decreased this year compared to what investors thought in 2014 (29 percent). 21 percent of Investors are seeing Western Europe as producing the best fixed income returns in 2015, up from 17 percent in 2014. Interest in the U.S./Canada fixed income returns also rose, with 14 percent believing these markets will provide best fixed income returns for 2015, relative to 10 percent in 2014.

 Why do you think Polish investors need to look beyond local markets to invest?

 Globalization continues to work its way through our lives – it has changed the way we shop, eat, communicate, travel and generally live. As economies and societies integrate, the world is shrinking and this in turn is throwing up more opportunities for businesses and investors alike. By its very nature, globalization has made investing-only-in-home markets less relevant. There is growing evidence that investing beyond home frontiers can help add significant value to one’s portfolio by spreading risk and enhancing returns.

 Major reasons for Polish investors to look at offshore markets include the need for greater diversification away from the relatively small domestic market; exposure to a much larger investment universe i.e. a wider selection of asset classes and sectors; the potential to benefit from attractive valuations and faster growth; and access to state-of-the-art research provided by global investment teams such as ours.

 Another important factor for both institutional and retail investors to consider is the sovereign and political risk that exists if one is invested too heavily in one country. It is essential for investors to maintain a well-diversified portfolio which is in line with their overall investment objectives, risk appetite and investment horizon.

What about diversifying across asset classes? Is there a trend you see? What does the survey show?

 We see real estate, precious metals and equities as the three most preferred asset classes in Poland. For the second year in a row, real estate tops the list as Poland’s investors’ most favored asset class (56 percent for 2015; 55 percent over the next decade), as precious metals (43 percent for 2015; 48 percent over the next decade), edged equities which was the third-most favored asset class expected to best perform in 2015 and over the next ten years with 42 percent and 40 percent respectively.

Globally, stocks continue to top the list of investors’ most favored asset classes. Fifty-seven percent of this year’s survey respondents expect stocks to be among the top performing asset classes in 2015. Real estate (52 percent) and precious metals (39 percent) round out the top three. There has been little movement in the top three over the past three years, which also holds true when looking at a longer investment horizon.

 How optimistic are Polish investors about achieving their financial goals?

 We have found that Polish investors are generally an optimistic lot but the level of optimism seems to have contracted slightly.

 79 percent of respondents from Poland have expressed optimism about reaching their financial goals in the 2015 survey, down from the peak of 85percent expressing confidence in 2014. This year’s result is slightly below the global average of 81 percent, with the most optimism coming from India, the UAE and China at over 90 percent collectively. Europe and the U.S./Canada showed the biggest increase in optimism compared to 2014. Up 4 percent from last year, 87 percent of investors in the U.S./Canada are optimistic about reaching their financial goals, while European investors’ optimism increased by 3 percent to 77 percent.

 Are risk aversion levels going up? Are Polish investors generally seen as risk averse? What are the main concerns?

 There are a few concerns that local investors in Poland have. Looking at top investing concerns for Polish investors, the results reveal a continued concern about uncertainty around general market volatility (44 percent), the Eurozone debt crisis (40 percent) and unemployment (36 percent).

 Globally, the top three concerns were listed as: the global economy (38 percent), government fiscal policy (32 percent) and the Eurozone debt crisis (32 percent). The global economy is the biggest concern, particularly among U.S./Canadian (48 percent) and APAC (40 percent) investors. Latin American investors are most concerned with government fiscal policy and inflation at 39 percent and 37 percent respectively, while the Eurozone debt crisis is the top concern in Europe at 48 percent.

 What about investment strategy for 2015, both in Poland and globally?

 This year’s survey has shown that Polish investors are generally bearish, with over half (54 percent) planning a more conservative approach to their investments. Additionally, the results also revealed that there was an increase in the number of investors expected to adopt a very conservative strategy compared to last year (from 12 percent in 2014 to 17 percent in 2015).

 Globally, the results were largely similar, with the majority of global investors (55 percent) believe their investment strategy will be more conservative in 2015. Malaysia is particularly bearish for 2015 with 71 percent of investors indicating they will be taking a more conservative investing strategy. At the opposite end of the scale, 63 percent of Chinese investors indicate they will be adopting a more aggressive investment strategy this year.

 According to the survey, do Polish investors believe in saving for the long term?

 Poland’s 2015 GISS results indicated that a vast majority (84 percent) are investing for retirement. Other savings vehicles used by investors include interest-earning savings accounts (27 percent) or saving in IKE or IKZE (24 percent). Although these results indicate a strong savings culture, Poland’s household savings remain some the lowest in Europe – with voluntary household savings representing a small percentage of GDP.

 Additionally, a vast majority (73 percent) of Polish investors evaluated the timeframe for the success of an investment between six months to three years, indicating a fairly short-term outlook when considering investments. Going forward, we would like to see investors looking at much longer investment horizons which is generally seen as the sign of a maturing market.

 Any closing remarks?

 We are delighted that Poland is included in the Global Investor Sentiment Survey for the fourth year running. This is certainly an important and increasingly dynamic market for Franklin Templeton, and one that has not had an easy year, in large part due to regional dynamics which still persist. We have seen this influence sentiment, as investors increasingly start to look abroad for opportunities. This outward view, although widening the opportunity set for investors, also raises the risk level, which is why we would encourage them to seek financial advice to understand what opportunities exist abroad, and how these may impact their portfolios.

 

2015-07-02



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