Although investors have shown strong interest in buying Hong Kong shares, analysts say it's important for them to diversify their portfolios across different markets. Lam Yik Fei / Bloomberg

Despite warnings by government officials and economists about the risks in the booming stock and property markets, a survey by a major US fund manager shows that investor sentiment remains high.

Based on its Global Investor Sentiment Survey, California-based Franklin Templeton conducted a survey which showed that Hong Kong investors expect both the local stock and property markets to continue doing well this year.

About 38 percent of respondents believed that Hong Kong would offer a higher return on equity investment than most other major stock markets worldwide, while 40 percent said they would raise their holdings in Hong Kong stocks in the coming months.

Hong Kong's benchmark Hang Seng Index resumed its rally on Tuesday, surging 2.8 percent to close at 27,850.5, regaining all the ground lost on Monday.

"We believe we're in a longer-term bull market in Hong Kong and on the mainland," said Tom Wu Wai-kwok, senior managing director of Templeton Emerging Markets Group. "The volatility of the Chinese yuan and the huge money inflow from the mainland have spurred positive sentiment in the stock market."

However, he warned that investors should stay cautious and avoid following market trends blindly. "In such a bull market, there will be corrections along the way, just like the one on Monday, and we need to be prepared for potential setbacks," he said.

Apart from equities, investors polled said they also expected healthy returns from fixed-income investments in 2015. The survey also shows that Hong Kong investors are prone to selling their investments to realize returns after a period of between six months and two years.

"One reason for Hong Kong investors' aggressive investment strategy is that their confidence in equities has been strengthened by the latest market rally," said Simon Wong Tak-Tai, Franklin Templeton's deputy head of sales.

Although the survey shows a strong case of home-bias among Hong Kong investors, Wong stressed the importance of diversifying their portfolios across different markets. "Diversification enables investors to attain their long-term financial goals while minimizing risks," he said.

In terms of top investment concerns for this year, 36 percent of respondents said they were uncertain about the state of the global economy, with 34 percent saying they were worried about the euro zone debt crisis, followed by 33 percent who said they were concerned with the mainland's slow economic growth.

celia@chinadailyhk.com

(HK Edition 04/22/2015 page8)