FYI | Oct 02 2012
It has been two months since the Australian Investors’ Association (AIA) in conjunction with FNArena announced the results of their two-monthly Australian Investors Sentiment Survey. Back in July, the survey showed sentiment was improving and now in September, confidence levels amongst Australian investors have continued to recover, with optimism, if anything, gathering speed. Although, it is important to note that despite improving sentiment, there are still many in the undecided category Portfolio allocations to cash still remain high.
The proportion of respondents that admit to having a Bearish attitude to investment markets has more than halved since May. 21% of those surveyed are now bearish versus 57% just four months ago. 59% identify as being Neutral, while 20% of respondents are now Bullish on investment markets. This latter read was at just 11% in July and just 7% in May.
Last time the survey generated a positive bias from 20% of respondents was in March 2011.
More than 45% of the survey respondents are positive on a longer-term outlook, expecting equities markets to be higher in six months time. This compares to just 33% in May and 39% in July.
25% of respondents do not expect higher markets in six months, compared to 43% in May, while 29% are expecting maintenance of the status quo. The decrease in those negative on a six month timeframe has certainly continued to improve, again pointing to a pick-up in sentiment, while the latter “Neutral” read has only changed a few percentage points over the last 4 months.
“The fact that there is such a low level of interest in the stock market at present and the fact that the banks are actually in a FAR better position than say 3-4 years ago (better profits and dividends) suggests that when the rally starts and sentiment improves, THE MONEY WILL MOVE back into the market from the sidelines,” said Cindy from Perth.
Survey respondent David put things a little more succinctly, saying “I think markets are going sideways, but anytime could start going up slowly to reach their long term trend.”
Eve from Perth said “The Australian economy remains strong, although the high Aussie dollar is hurting. With the possibility of falling interest rates our higher yielding stocks (e.g. banks, telecommunications) should remain attractive. I expect a recovery in the iron ore and coal prices next year, which will give our market a lift.”
While portfolio asset allocations have varied only a little over the last twelve months, the September survey suggests investors have been cashing in, a little, from their fixed interest allocations while putting a little more into equities.
Respondents now have 44% of funds allocated to equities, up from 43% in July and 42% in May. At the same time, 24% of portfolios now sits in cash, unchanged from May and 2% higher than in July.
Property on average represents 19% of funds (unchanged from July) while the average percentage for fixed income dropped to 13% from 16% in July.
“As long as the interest rates for term deposits were much higher than the returns from equities cash was king. With lower interests a rethink of investments is necessary.” – Anon
“Volatile markets mean a solid Cash holding must be held. Property appears to be fully priced. No interest in Fixed Income investments.” – Anon.
Meanwhile, Margaret of Sydney best described the growing importance of diversification, saying: “With so many changes taking place from day to day, and being within 5-8 years of retirement, we feel that being spread across asset classes gives us the best chance of not losing the lot in the worst case scenario. We are still looking for some growth, so are slightly weighted towards equities (some local, some international), but have more in cash now than ever before. We would hate to have to ditch good shares to generate income.”
Overall, the AIA Investor Confidence Index backs up the growing level of optimism shown by the survey, with the read showing a continuing increase in investor confidence in September. With the September value now above 50%, we can say that a cautiously positive attitude is now beginning to emerge.
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 (November 2012). 344 respondents participated through the AIA and 299 through FNArena.
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