FYI | Dec 02 2013
Investors in Australia remain cautiously optimistic on prospects for investment returns via the Australian share market but they also show little intention of allocating more cash from the sidelines into Australian or global equities.
The Australian Investors' Sentiment Survey for November, conducted by the Australian Investors' Association (AIA) and FNArena, shows the average cash held in Australian investment portfolios has stabilised around 19%. While this is down from a registered peak of 26% in September 2011, the number has hardly moved throughout the present calendar year during which (global) equities proved the best performing asset class.
In similar fashion, relative allocation to equities seems to have stabilised a fraction above 50% as Australian share market indices surged to new five year record highs during the month. A small retreat in overall optimism, both on an immediate and 6-12 months outlook, adds to the general picture that investors remain hesitant in allocating additional funds to equities.
Current relative portfolio allocations are close to levels that investors had indicated previously as "ideal allocations" to various asset classes. Allocations to property and fixed income remain little changed from their three-year average values of 18% and 14%, respectively.
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Given the Australian share market rallied to its highest level in five years in November, it's probably of little surprise Australian investors have scaled back their optimism regarding the immediate outlook for equities with a majority retreating into Neutral sentiment. But even on a 6-12 months horizon, investor views appear to have grown more cautious even though a clear majority expects the share market to book further gains in the year ahead.
When asked about immediate prospects for local equities, the November Survey generated the following outcome:
When asked about the outlook on a 6-12 months horizon, the results were as follows:
The general underlying sentiment of "cautious optimism" was reflected in comments provided with the Survey.
"Bullish until about March 2014, then go defensive", indicated one investor. Another respondent flagged "Bullish till February, and then bearish for a time".
A major cause for caution remains the share market's overall valuation, with one investor indicating "Think interest rates may have bottomed but shares seem fully priced". Another investor offered: "This is not the time to be paying above book value just to be in the market".
Yet another respondent stated: "Unless something major comes out of left field, I am pretty confident about the direction of the market. Taper talks unsettle the markets and provide buying opportunities".
All in all, general sentiment might have been best summarised by the investor who responded: "I am comfortable with the shares I hold which were bought below current prices and I am bullish long term".
In line with all other indications from the November Survey, the Confidence Index retreated somewhat from the level indicated in September, but at 56% it remains in positive territory (albeit at the lowest level for the year):
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 (January 2014).
284 respondents participated through the AIA and 239 through FNArena.
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