The Colonial First State Global Asset Management (CFSGAM) and University of Western Australia (UWA) Business School Equity Preference Index (EPI) found that while net purchases by institutions – consisting of superannuation funds and foreign investors – were high, retail investors have been net sellers of equities for around three years.
“To see an expanding re-allocation into equities from retail investors, we will need to see greater confidence in the Australian economic outlook,” CFSGAM’s economic and market research senior analyst, Ryan Felsman, said.
“Currently, there are mixed fundamentals for Australian shares.
“Improving domestic activity and low inflation is being somewhat counterbalanced by slower China growth.
“This is reflected in sluggish Australian company earnings outcomes.”
The EPI – which measures investor sentiment of non-advised investors, tracking overall moves in and out of equity-based managed funds and switches between asset classes – also found that low interest in term deposits did not result in higher allocation to equities from retail investors.
While the analysis revealed a largely neutral outcome for investor equity preference, broader underlying trends within the index suggest investors moved into investment options with higher equity exposures than their previous allocations during the quarter, Mr Felsman said.
“While we acknowledge that interest in equities is still not far off its lows, Australian households appear to be becoming more comfortable investing in risk assets, with interest in equities and superannuation at their best levels in two years, according to recent consumer sentiment surveys,” he said.
“Recent consumer surveys have exhibited a shifting preference from paying off mortgages to investing in real estate and equities.
“Term deposits are offering unattractive yields, with official interest rates at a 53-year low of 2.5 per cent.
“Therefore, many investors are seeking to put their money to work, moving it up the risk spectrum, which follows increases in personal wealth due to surging property and share prices.”
