FYI | Nov 30 2011
Finally, some good news for the Australian share market! The Australian Investor Sentiment Survey for November signals investors have, on balance, stopped selling equities and are waiting for an opportune moment to start buying again, though not before volatility has subsided and governments in Europe and the US get a better grip on their financial problems.
The Survey, conducted by the Australian Investors' Association (AIA) and FNArena between 22 and 25 November shows overall sentiment has improved, albeit from very low levels in September, while the cash component in the average investment portfolio remains high but is no longer rising.
The average investment portfolio in Australia now has circa 24% in cash, down from 26% in September, but still above the 21% registered in June. The proportion allocated to equities has remained stable around 44% (49% in June; 53% earlier in the year), while property lifted to 19% and the remaining 13% sits in fixed interest.
The Survey also suggests negative sentiment towards equities bottomed between July and September. As shown in the Table below, not only is there a slow increase in the small number of AIA respondents who remain positive ("bullish") on short term prospects for equities, but there is now a marked decrease in the proportion indicating "bearish" sentiment.
Results at FNArena showed a similar trend, with 12% of respondents now bullish, 41% bearish and 47% neutral. On a 6-12 months view these numbers are 32%, 32% and 36% (both AIA and FNArena combined).
Overall, current “neutral” investor sentiment is probably best summed up by Robert Feldmann from Melbourne:
"At the present time, it is simpler to be neutral rather than bearish or bullish. Prophets the world over are decidedly bearish and with some justification. Trying to invest sensibly in this mad, mad world defies logic. Bide time, I say, and curb your impatience. Doing nothing can be more profitable than making unforgivable mistakes with your hard earned money".
The view is shared by Peter Campbell from Perth: "There's too much uncertainty at present to be other than neutral. The size and the speed of the swings make it impossible to predict (guess?) whether the next movement is up or down. Europe is improving, slowly, and likely with more shock-waves to come."
Meanwhile, many are seeking safety in yields, both inside and outside the share market, such as Ian G Fraser from Brisbane: "Sticking it out in good quality mainly high yielders" and Wally Tudor from Perth: "Just collecting divys and interest. Until things settle down, I won't be doing much, except reduce debt".
Trevor Jones has a different take on things: "The market at the moment is very volatile, but has some good buying opportunities because of the fall in prices over the last 12 months. There are some good stocks to buy into for medium and long term buys and worth it as I believe the market will become more bullish within 6-12 months with the US market no longer in recession, but taking longer to recover. As there is still lots of cash awaiting in the US with equities, the market will grow as the sentiment and confidence picks up over there, and hence, our market will follow with that confidence."
In line with all of the above, respondents indicated their overall confidence has risen slightly from low levels in September.
The Investor Sentiment Survey asked members at AIA and FNArena how they felt about the market and how they were invested. Surveys were conducted over four days (22-25 Nov) and will be repeated in two months (January 2012). 434 respondents participated through the AIA and 346 through FNArena.
Technical limitations
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