Expats profit from international exposure

• Investment outperformance driven by exposure to international markets
• But oil worries and US economy cause uncertainty
• Investors attracted by Asian markets but some wary about investing there, though they're happier to live in Asia than anywhere else

Luxembourg, 1st August - 80% of expat investors claim to have outperformed or matched markets. Moreover 90% of those investing in less established markets have outperformed or matched the market.

Expats who outperform invest in an average of 3.4 different markets, whereas those who underperform invest in an average of only 2.6. Those who outperform are twice as likely to have invested in three or more markets than those who underperform.

The findings come from the fourth biannual research study among expatriate investors by Internaxx, an online broker dedicated to expatriate investors in more than 110 countries and part of Banque Générale du Luxembourg/Fortis and TD Waterhouse.

However, confidence among expat investors that markets will grow has dropped by more than half in the last six months. Today, 25% hold that view, down from 53% in November 2004.

Uncertainty has risen significantly - 54% are now 'undecided' on future market growth, up from 9% in November 2004.

Among those (21%) who think markets will not grow, stated reasons are mixed. Fears about oil prices and the US economy come first (1 in 4) followed by the poor EU economy (16%) and low consumer confidence (13%). "Continental Europe is still practically in recession" says one investor. "We have a huge pending oil crisis and a massive US trade deficit, as well as trade disputes between China and the US" says another.

Among the 25% anticipating growth, reasons include positive sentiment about the Asian economy (one in four) with a similar number citing confidence in global economic prospects. As one investor says; "The Euro zone is weak and the UK faces problems, but China and India are forging ahead by the day".

Among all investors Asian markets rank highest in order of favourability and more investors feel positive about China than about any other market. In total, 55% of investors felt positive about Asian markets with the UK following behind at 37%. Investors are more polarised regarding European stocks (36% positive v. 38% negative) and the US clearly comes last with only 24% feeling positive towards the region compared to 46% claiming to be negative.

But positive sentiment towards a market does not always translate to action. Among those who are positive about China or Asia, only one in three actually invests in China, and just over one half invest in other Asian markets. Insecurity and lack of awareness typify investors' views of the Chinese and Asian markets with 50% of those not exposed to these markets claiming insufficient knowledge and one in five voicing concern over corporate governance or economic prospects.

Positive sentiment about Asia extends to lifestyle. Expat investors are happier to be in Singapore and Hong Kong that those based anywhere else (65% say they are 'very content' with their lifestyles there compared to 55% in continental Europe and only 43% in the UK). However, expats based in continental Europe are most likely to retire there (34%) compared to 10% among those in the Middle East, and only 5% in the UK.

Expat investors tend to understate their exposure to risk. While the vast majority hold blue chip shares, 45% balance their portfolios with highly volatile stocks. And with 47% invested in Asia, 27% invested in China and their most widely held asset class being shares (86%), investment patterns of expat investors tend to be more exposed to risk than they would care to admit.

The same imbalance holds true regarding their international exposure, with those claiming to have more of an international outlook than other investors dropping from 75% in November 2004 to 55% today, despite their highly international trading activity.

Says Glaesener; "Expats do not seem to realize how sophisticated their investment patterns are. Expat investors are more progressive than what they state with much more internationally diversified portfolios and trading frequencies".

Possibly as a result of their sophisticated investment needs, research shows a large drop in the percentage claiming to be very satisfied with their principal financial providers from 37% in November 2004 to 18% today. The biggest complaints are about customer service (50%), investment performance (50%) and price (44%). One in three is dissatisfied with the accessibility of their account manager and one in five does not rate their share dealing efficiency.

This sophistication is reflected in their sources of investment information. Interestingly, 46% rely on their financial advisers and 30% on their banks for advice, though overall 61% also claim to be self directed, depending on a wide array of national and international media, internet and broadcasters for their information.

Attitudes to property make interesting reading. After shares (86%) the most widely held asset class is property at 68%. One in three investors anticipate increasing their exposure and most of the remainder expect to keep their expsosure constant. Only 6% said they would definitely sell.

Attitudes to sustainable and ethical funds vary widely. Though the average investment among such funds is highest in Singapore and Asia at 16% it is lowest among those based in continental Europe at 4% and 8% among expats based in the UK and Middle East.

Robert Glaesener sums up; "Expat investors fully profit from their international exposure. Their dissatisfaction with growth prospects in developed markets makes them turn to economies where they see more potential. Given their background, they are best equipped to successfully exploit rallies in markets worldwide".

Main findings

Methodology: 4th expat survey, sample of 200 expat investors in UK, Continental Europe, Asia and Middle-East, postal survey.

Investment patterns:

• are invested on average on 2.9 different markets,
• 86% invested in shares, 68% in property, 62% unit trusts, 49% fixed income.
• 89% invested in European shares, 52% in US shares, 47% in Asian shares
• Performance: 27%/53%/20 % claim to have outperformed /matched/ underperformed the markets over the past 12 months. Reasons of outperformance: international exposure.

Confidence: 54% are uncertain about the future growth of the markets (vs 9% in nov. 2004), 25% believe that the markets will continue to grow in 2005 (vs 53% in nov. 2004) and 21% not grow (vs 38% in nov. 2004).

Reasons to be optimistic: positive sentiment about Asian economy, confidence in global economy. Reasons to be pessimistic: oil prices and US/EU economic prospects.

Geographic sentiment: positive about Asia (China: positive +38%, negative, -12% / other Asian markets: positive +37%, negative -10%) but for some, main reason not to invest in Asia are insufficient knowledge and concern about corporate governance and economic prospects.

Happiness with lifestyle: globally very happy (56%), and happiest in Asia (65%).

Editors Note

The research was commissioned by Internaxx. Fieldwork was undertaken in June / July 2005 by Resolution Research among 200 expat investors drawn from a database of professionals with the status of senior manager or higher evenly split in their residence across Europe, the Far East and Middle East. Overall, 70% earn upwards of £55,000, and 30% earn over £75.000

For more information

Robert Glaesener General Manager- Internaxx
00 352 2603 2046
robert.glaesener@internaxx.lu

Sophie Noel Communication Manager - Internaxx
00 352 2603 2026
sophie.noel@internaxx.lu

Nick Hadjinikos Kallinos Communications London, 00 44 208 940 8239
nick@kallinos.com

About Internaxx

• Internaxx is an international online brokerage service based in Luxembourg, and a joint venture between TDWaterhouse and Banque Générale du Luxembourg/Fortis. It offers online real time share dealing, FX and derivatives trading to several thousands of expatriate and international investors worldwide. Internaxx can be accessed online 24 hours a day and 7 days a week via www.internaxx.lu, or through a multi-lingual Call Centre during trading hours. For more information, visit www.internaxx.lu
• Internaxx (The Bank of TDW & BGL S.A.), is registered and regulated as a bank under Luxembourg law. It is a member of the Luxembourg deposit guarantee scheme.

About TD Waterhouse

• TD Waterhouse - part of the TD Bank Financial Group - is one of the world's largest discount brokers, providing investors with a broad range of brokerage, mutual fund, banking and other consumer financial products.
• Worldwide, TD Waterhouse services more than 3.3 million customer accounts and has over US $175 billion of assets under management.
• For more information, visit www.tdwaterhouse.com

About Banque Générale du Luxembourg

• Banque Générale du Luxembourg S.A. is one of the leading banks in the Grand Duchy of Luxembourg. It is a member of the Fortis Group, the international financial services provider operating in the fields of insurance, banking and investments.
• Active in the domestic and international markets, Banque Générale du Luxembourg is active in retail banking, private banking, commercial banking, in the Capital Markets, and in Investment and Pension Funds.
• For more information, visit www.bgl.lu