FYI | May 29 2014
Investors in Australia have increasingly turned less bullish about prospects for investment returns from Australian equities. The Australian Investors Sentiment Survey for May shows a large majority (64.5%) now holds a neutral view on the short term outlook for the Australian share market while those who are still optimists only represent 17.5%– the smallest group in this month’s survey.
The recorded 64.5% of respondents with a neutral view on the share market is the highest in the history of the survey, which was first conducted in January 2011.
Investors’ increasingly cautious view towards equities is further supported by the observation that other indicators of positive sentiment and funds allocation into the share market have retreated to levels last recorded in late 2012.
Past records from the Australian Investors Sentiment Survey, coordinated every two months between the Australian Investors’ Association (AIA) and FNArena, show the average cash percentage in investment portfolios has moved between 18 and 20% since early 2013. This month’s survey takes cash back to the top of that range, indicating investors have taken some exposure off the table since the previous survey in March, when cash was at 18% and equities at 53.5%, their peak thus far.
This observation falls in line with statements made by respondents such as “nervous”, “waiting for the correction” and “keeping powder dry for opportunities to arise”. The more cautious approach also appears to be linked to reduced growth expectations for the domestic economy, with investors referring to likely reduced consumer spending post the first Abbott-Hockey budget, a lower price for iron ore and the potential for a correction in the Chinese property market as reasons to be more cautious.
In line with the observation that the 64.5% group of neutral/cautious investors has never been larger since the first Australian Investors Sentiment Survey was held in January 2011, comes the fact that the 17.5% of equity bulls marks the lowest number since November 2012 when the percentage fell to 14%.
Investor sentiment regarding the share market improves when looking 6-12 months forward, but here too the group of optimists –-at 45.5%– is the lowest since November 2012.
A similar picture emerges for the AIA/FNArena Investor Confidence Index which remains above 50, historically the division between negative and positive, but this month’s 55.5%, also, is the lowest mark since November 2012, as well as representing a notable retreat from the 60.2% registered in March.
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 2014).
289 respondents participated through the AIA and 382 through FNArena.
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
