article 3 months old

Australian Investors Ready To Invest More In Equities

Australia | Aug 01 2014

Investors in Australia have become more optimistic about prospects for the local share market. Average cash levels in investment portfolios have fallen to the lowest level post-GFC, but a general reluctance remains with many investors indicating they are waiting for a market correction before allocating more funds.

The Australian Investors Sentiment Survey for July, conducted by Australian Investors’ Association and FNArena, shows the average portfolio allocation to equities has now risen to 54%, the highest level since the first Survey was held in January 2011. At the same time, average cash levels have fallen to 18% from 20% in May.

Since January 2013, cash levels have never been lower and the average portfolio weight for equities has never been this high. Both observations are supported by a noticeable jump in general optimism towards the outlook for Australian equities.

General commentary provided by respondents to the July Survey indicates investors have been cautiously shifting more funds into the share market, while rising share prices have also contributed to the rise in equities allocation in portfolios to 54% from 50% in May.

Investors’ medium term outlook (6-12 months out) has remained positive this year and remarkably stable since the previous Survey in May.
 

Positive sentiment towards equities in the short term has improved noticeably since the prior Survey in May, but the number of bulls remains well contained in comparison with Surveys last year.

Remarkable is that the percentage of respondents with a Neutral view on the market remains at a historically high 60%, and it has remained this high thus far this year.

Respondents indicated they remain cautious because of geopolitical events in the Ukraine/Russia and between Israel and Hamas, while the end of Fed tapering, the Chinese economy and the local government in Canberra having to battle a hostile Senate were also mentioned.

A number of respondents referred to the all-time highs currently being recorded in the US stock markets, with the expectation that a meaningful correction may be due.
 


 

Medium term, general optimism continues to dominate but at lower levels than registered in 2013. The lift in cautiousness reveals itself through a relatively high percentage (34%) of respondents who see no significant movement for the share market 6-12 months out.

All in all, responses in July are little changed from the medium term outlook in the May Survey.
 


 

The general increase in underlying optimism is also reflected in the rise for the AIA/FNArena Investor Confidence Index which, at 59.1%, remains close to the highest level registered in the history of this Survey (61.4% in January last year).

The Index has now consistently remained above 50, the division between negative and positive, since September 2012.
 


 

The Investor Sentiment Survey asked members at Australian Investors’ Association (AIA) and FNArena how they felt about the market and how they were invested. The Survey will be repeated in two months' time (September 2014).

238 respondents participated through the AIA and 415 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.

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms