As the expectation of a rate cut by the Federal Reserve increases, risk appetite among Asia-Pacific investors has correspondingly increased, and they are starting to consider transferring cash to the stock market. According to the 2024 Asia-Pacific Investor Survey by Fidelity International, as cash assets such as fixed deposits have been offering interest rates higher than the levels of the past decade in recent years, almost half (48%) of Asia-Pacific investors generally allocate their assets to current and fixed deposits, but as the rate cut cycle is expected to unfold in the next 6 to 12 months, investors in the region are gradually losing their enthusiasm for cash, and stocks are replacing cash as the first choice for investors to enter the next market cycle.

The above survey shows that Asia-Pacific investors are preparing for the likelihood of a rate cut by the Federal Reserve in the next 6 to 12 months, moving towards a preference for risk mode, and planning to reduce their holdings of cash and transfer it to other investment products. Based on the fact that stocks have always benefited from rate cut cycles, more than half (53%) of the investors in the region intend to increase their stock investments, especially in China-Taiwan (61%), Singapore (60%), and Australia (59%). The proportion of Hong Kong investors is 49%. In addition, 61% of Hong Kong investors plan to invest in profitable assets, which is roughly the same as the Asia-Pacific average (64%), while investors in China-Taiwan (74%), Australia (73%), and Singapore (72%) place special emphasis on profitability. In addition, 28% of Asia-Pacific investors plan to greatly increase their allocation to bonds.

Although the survey shows that the interest of investors in the region in risk assets continues to increase, there are still a significant number of investors (40%) planning to increase their holdings of cash in the next 12 months. Another one-fourth (24%) of investors in the region plan to invest more funds in fixed deposits. Only 17% of Asia-Pacific investors plan to reduce their allocation of risky assets in the next 12 months, based on expectations that the market will be more volatile, lack of confidence in the market after several years of volatility, and generally low risk appetite. This may result in investors missing the next market cycle or even missing the opportunity for long-term capital appreciation.

Fidelity International's investment strategy director, James Chen, said that most investors in the region are actively considering investment opportunities outside of cash such as stocks and bonds to capture the next market cycle. Although holding cash in an investment portfolio can maintain the liquidity and flexibility of funds, holding too much cash may lower the overall return of the portfolio as interest rates are lowered. The primary investment goal of most investors in the region is long-term capital accumulation, and they expect an annual return of up to 8%, so seeking investment choices outside of cash is crucial.

The recent strong performance of the US market is expected to be the most sought-after by Asia-Pacific investors in the next 12 months, followed by the global and Asia (excluding Japan) markets. Survey results show that Asia-Pacific investors have built a diversified investment portfolio with an average of three assets. Allocating funds to different assets and markets can help increase returns and reduce risks, which is an important driving force for long-term and sustainable capital growth.

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