Households prefer property, FDs over gold: Morgan Stanley

Moneycontrol Bureau

Brokerage-house Morgan Stanley estimates that households are responding to an environment of high inflation and sluggish growth by loading up on fixed deposits and real estate.
A report by the brokerage released on Thursday reckons nominal savings in the first half of calendar year 2012 to have declined 2% compared to the corresponding period last year. Also read: Gold futures down on profit-booking, weak global cues
"Households have focused on two asset classes - bank deposits and property- a change from the pervasive preference for gold witnessed in recent years. In value terms, gold is down 11%, bank deposits are up 7% and property is up 37%. Fixed-income mutual fund flows remain positive, but are down 58% y-o-y. Small savings have fallen 15%, but new insurance premiums are up 8%. Equity savings have nearly doubled in the first half (January-June) of 2012 over the first half of 2011, albeit on a low base," Morgan Stanley strategist Ridham Desai and team submitted in the report.
The report goes on to point out that real estate is steadily replacing gold as the physical asset of choice. "It appears that the current physical asset of choice, unlike in the past two years, is real estate and not gold. And the preference for yield and safety is declining at the margin, recording a shift from the trend witnessed in 2011. The relative preference between financial and physical assets has also narrowed - financial savings are down 2.9% whereas physical savings are up 0.5% in the first half of 2012 - the shift was 10% and 48% respectively in the first half of 2011," the report explained. Also Read: Realty prices set to fall
The team of strategists headed by Desai also admitted that they did not have data on renewal insurance premiums, investment in small businesses, provident fund and pension fund flows, currency holdings, non-banking deposits and broader details on property purchases. But they claim that their data is still "representative".