Down But Not Out

Australian expectations on the performance of investment markets are continuing to deteriorate, quarter on quarter, but a positive can be drawn that negative sentiment is at least beginning to fall at a slower rate.

The first quarter of 2009 recorded a -22.3 score on a scale ranging from +100 representing an extremely positive score, and -100 extremely negative, according to the newly released IFSA CoreData Investor Sentiment Index.

The Investment and Financial Services Association has partnered with CoreData, which has ran the index since 2004, to bring it to the market.

Investor Sentiment is at a low without a doubt, however it must be noted that the measure is only one-fifth along its full spectrum in terms of negativity. This means despite everything that has happened since the financial crisis went ‘full-blown’ investors are shaken but now there’s a chance they will stir.

For investors to only display the level of negative sentiment they are is reassuring to the market considering the All Ordinaries hit an end of day low of 3111 in March taking it almost 55% below its November 2007 peak of 6873.

Australian’s appear resolute in the fact investment markets may be reaching perceived lows, as the March 2009 score fell only two points from the December 2008 quarter result of -20.3.

The negative investment sentiment tipping point occurred during the first quarter of 2008, when sentiment crashed to a -9.3 level, after recording +14.4 a quarter before, as the impact of the already under way credit crisis began to be understood by the general public.

Sentiment continued to deteriorate during 2008, but at a slower level, with -10.3 recorded in the second quarter and -13.3 in the third quarter.

Our research shows that this is not the first time Investor Sentiment has been in the doldrums. Responding to falls Australian equities, international equities and the listed property market, as well as an increase in the cash rate early in 2005, the ISI hit -8.7 June 2005.

Even with investor confidence falling for the last five quarters, there are some investors of the opinion it’s a good time to buy new investments at reduced prices, or top up existing investments, helping to average down entry prices for assets purchased in recent years.

43.8 per cent of investors surveyed have purchased a new investment product, or invested more into already held investment products, over the last twelve months.

Future expectations of economic growth are weak, with almost nine out of ten investors of the opinion the economy will continue to slow over the next quarter, with confidence of near-term growth in the economy at its lowest point since the question was first put to the public in 2005.

Even with the slowing economy, most Australians are feeling financially secure, with falling interest rates and lower petrol prices helping to ease the pressure.

41.2 per cent feel financially secure, as opposed to 27.9 per cent who feel financially insecure, with financial security heavily linked to job security.

The IFSA CoreData Investor Sentiment Index compiled the opinions of more than 700 Australians, during the first quarter of 2008.