Same Same?

Investor reaction to the recent US sub-prime lending induced share market dip reflects other recent adjustments in the Australian equities market over the past few years according to new CoreData research.

There have been at least three corrections in the Australian All Ordinaries over the past three years – March/April 2005, May 2006 and the current one that began in July this year.

These declines have all had the impact of driving down subsequent investor sentiment towards Australian shares.

This is reflected in some of the quarter on quarter data gathered from the CoreData Investor Sentiment Index – the information for the latest one was collected between August 9 and August 14, 2007.

With the Investor Sentiment Index, CoreData also tests if people are putting their money – or not, depending on their sentiment – where their mouths are.

The level of commitment to Australian shares is shown below.

The chart shows how strongly committed investors were to Australian shares in quarter 3 and quarter 4 of 2006.

The level of commitment started to drop by quarter 1 2007 ahead of recent market adjustment and is heading down to a neutral range (a score between 2 and 3) ahead of the recent market correction.

The index also shows other investment classes continue to be unattractive to investors with sentiment towards property investments, international equities and bonds all declining in the current survey.

Investors expect equities to outperform property over the next quarter.

It may be that investors continue to remain overweight in Australian Equities simply because they see nowhere else to invest.