Gold, equities top inflation hedges in Asia: Survey

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Gold could increasingly be investors' top hedge against mounting inflationary pressures in Asia, a regional survey showed on Wednesday.

With economic growth in Asia expected to lead the world again in 2010, 45% of investors in the region's markets outside of Japan picked the precious metal as their most favoured tool to protect their returns from inflation, while 42% chose equities, according to a quarterly survey from ING.

In the final quarter of 2009, gold was still only the fourth-favourite choice among investors, even though the%age of investors expecting a rise in inflation in 2010 climbed 6%age points to 77%, suggesting there is room for gold to rise.

"It's a perfectly rational response if you think inflation is going to pick up to shift more of your portfolio to commodities and gold. That has traditionally been the smart thing to do," said Paul Klug, regional general manager of ING Investment Management Asia Pacific.

The ING Investor Dashboard survey polled 3,700 high net worth investors in December.

Inflation expectations for 2010 showed the biggest quarterly rise in Thailand, with the share of investors expecting prices to climb more quickly nearly doubling to 85%. India was next, with 86% of those canvassed expecting inflation to accelerate, up 28%age points.

China remained among the countries with the highest proportion of investors predicting more price pressures this year, edging up 5 points to 87% in the fourth quarter.

Investors around the world have been reducing their exposure to risky assets and currencies after rampant lending in China spurred Beijing to tighten monetary conditions to prevent excess cash in the economy from fuelling inflation and asset bubbles.

So far in January, the MSCI index of Asia stocks outside Japan is down 5% and gold in the spot market is up 0.5% .

The investors in the survey remained very confident stock and real estate markets will hold ground in the first quarter of 2010. In Asia ex-Japan, 83% expect stocks to either stay near current levels or rise, and 86% see residential real estate prices steady or climbing.

"We're still very early in the recovery," said Klug.

"There's demand that is justified and I don't think we have reached a point where there is too much money chasing too few investment opportunities."

The survey's sentiment index for Asia ex-Japan rose for a fourth consecutive quarter to 147, up 101% on the year.