FYI | Jun 04 2012
Euro Woes Hit Australian Investor Confidence – Sentiment Falls To New Low
Sentiment among Australian investors has fallen markedly over the past two months. Many respondents to the Australian Investors Sentiment Survey for May, conducted by the Australian Investors’ Association (AIA) and FNArena, have turned decidedly bearish.
Pessimism levels are now at a peak of 57% of respondents, beating the 56% reading in September last year. The timing of the latest survey goes a long way in explaining current attitudes, as the survey was conducted after two weeks of share market declines and over the weekend that followed Greece’s failure to form a Government.
Over that period, there were minor runs on the major banks of both Greece and Spain. Adding fuel to the fire was commentary from BHP and Rio Tinto, who both started talking about cutting growth-related capital expenditure because of a slowdown in China.
Summing up the current attitude well was Peter Knight from Perth, who said “I expect the global situation to worsen as the ineptitude of policy makers reinforces market participant’s pessimism. The scale of the task of debt reduction is so huge that there is no possible solution to the problem unless the authorities resolve to allow bond holders to take massive losses and allow many banks to go to the wall.”
AR Chee chimes in with: “Every time I start to think markets are improving or at least stabilising, another major hiccup turns up. Getting fed up and wondering where else to put my rapidly depleting money. Feel like I've had a few sucker punches.”
“Europe is imploding now and until hard decisions are taken the problem will not be fixed. There is the American presidential elections later in the year so no one will make any hard decisions in the run up,” said Matt from Brisbane.
Unsurprisingly, a greater number of survey respondents indicated an intention to take funds out of the share market and into cash and fixed income investments. Respondents indicated circa 24% of portfolios are now allocated to cash. This is up from 22% in March. Equities allocation has dropped from 47% to circa 43% at the same time.
Bob Feldmann summed up current investor uncertainty as follows: “I haven't got a profound interest in property or fixed income and equities are my way of investing. Keeping a reserve in cash provides comfort in these troublesome times. I want to sleep peacefully”.
Overall investor confidence has now fallen to levels where only one third of respondents expect equity markets to be higher in six months time.
In line with all of the above, investor confidence has fallen dramatically since the March survey, with the AIA Investor Confidence Index now down to 40.6, the lowest level recorded since its initiation in March 2011.
The Investor Sentiment Survey asked members at AIA and FNArena how they felt about the market and how they were invested. The Survey will be repeated in two months (July 2012). 436 respondents participated through the AIA and 203 through FNArena.
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