Canadian investor optimism steady this quarter

Real Estate drives investor confidence: Manulife Financial Investor Sentiment Index

- The results of the Manulife Financial Investor Sentiment Index announced today demonstrate that, in spite of the uncertainty surrounding the global economy, Canadians continue to be cautiously optimistic in their attitudes towards investing. The findings indicate particular optimism relative to real estate; this quarter, confidence in investment property increased markedly, despite the heightened concern around interest rates also recorded by the survey.

According to the results of the Manulife Financial Investor Sentiment Index, Canadian investor sentiment has been stable in 2011, rising by one point since March 2011 to +29. The Index also reveals that Canadians show no significant change in their investment preferences, and tax free savings accounts continue to be the investment vehicle of choice, rising one point on the Sentiment Index this quarter to +63.

The Manulife Financial Investor Sentiment Index is a quarterly poll of 1000 Canadians. The Index tracks Canadians' sentiment towards investing in 11 different financial categories and vehicles and reflects the percentage of those who say they believe it is a "good" or "very good" time to invest minus those who feel the opposite.

"Not surprisingly, Canadians remain concerned about a number of important issues that influence the strength of our national economy," noted Paul Rooney, President and CEO, Manulife Canada. "It is important to note, however, that while Canadians are concerned about the price of gas, oil and health care, their optimism for investing has remained consistent and steady throughout this year."

Issues of Concern for Canadian Investors

This quarter, Canadians were also asked about their level of concern on a number of issues impacting the national economy.

Those polled by the Manulife Financial Investor Sentiment Index were apprehensive about a wide range of domestic issues, with 87% saying they were concerned about oil and gas prices. Other issues of significant concern include health care, the national debt and the unemployment rate in Canada. Of least concern to Canadian investors are stock market volatility and the strength of the dollar.  Notably, 66% of those polled expressed concern about interest rates, a key driver of real estate investment.

Canadians' cautious optimism towards their finances is also reflected in their summer vacation plans. Though close to 80% of Canadians surveyed indicated they would take vacation time this summer, over one third will be staying close to home, visiting local attractions, or heading to a cottage or vacation property.

Other Key Findings from the Manulife Financial Investor Sentiment Index

Key findings from the Index this quarter include:

• Investor confidence is at its highest level since March 2010, up 4 points compared to one year ago and 9 points compared to 2009.
• Canadians continue to demonstrate confidence in real estate, and prioritize investment in their own homes, including both renovations and mortgage payments.
• Cash investments such as savings accounts and money market funds, and stocks remain on the lower end of the Canadians' investment preferences.
• Canadians continue to see tax free savings accounts as their preferred investment vehicle.

Summary of Highlights

The Manulife Financial Investor Sentiment Index is based on six investment categories, shown below in order of their overall ranking in the survey. Real estate, including both Canadians' own homes and other properties, sits at the top of the Index, while stocks, which took a tumble throughout the first quarter of 2011, are in last place.

• Canadians continue to feel most confident about investing in their own homes though confidence in this category decreased by two points to +59.
• Investment property climbed significantly this quarter, rising 7 points to +32.
• Balanced funds continue to be a popular choice for Canadian investors, but experienced no change on the Index and have maintained their place at +32.
• Fixed income investments increased 4 points since March 2011 to +23 on the Index.
• Trust in cash investments increased by 3 points this quarter to +22.
• After gaining 10 points on the Index from December 2010 to March 2011, confidence in stocks has decreased 3 points to +7.

Investment Vehicles

The Manulife Financial Investor Sentiment Index evaluates five investment vehicles, with the results announced today showing that as of June 2011, Canadians have the most confidence in tax free savings accounts, while segregated funds remain less attractive to Canadian investors.

• Tax Free Savings Accounts held the top spot once again, with the Index showing that confidence in TFSAs increased by 1 point to +63.
• RESPs were up 1 point from March 2011 to sit at +49 on the current Index.
• RRSPs have fallen 2 points in popularity through the first quarter of 2011 and are tied with RESPs at +49 on the Index.
• Mutual funds, which experienced a dramatic rise in confidence from December 2010 to March 2011 when they climbed from +14 to +25, did not show any movement this quarter.
• Segregated funds remain in last place at +24, but confidence in this vehicle has increased slightly from March 2011 when they stood at +23 on the Index.

This survey of 1,000 Canadians aged 18 and older was conducted by Research House, an Environics Company, between June 21 and 26, 2011. The results have a margin of error of +/- 3.2%, 19 times out of 20.