Advisers and investors pessimistic about sharemarket

Investment sentiment among both financial advisers and investors is at rock bottom, according to surveys conducted by Adviser Ratings and theAustralian Investors Associationthis month.

Looming conflict in the Middle East and continuing declines in local and international share markets have been offered as possible reasons for the pessimistic outlook.

The picture for February is a transformation from the previous survey in December, with 15.6 per cent of advisers considered bearish, almost three times more than the December figure.

The proportion of advisers considered bullish stood at 35 per cent in the latest survey, 20 per cent down on the previous result.

Investors are even more pessimistic than advisers, with only 12.1 per cent believing the sharemarket will rise.

Investor asset allocation was also a reflection of the general sentiment, with record lows for allocation to both domestic and international sharemarkets and record highs for cash and property.

On the reason for these movements, AIA President Bob Andrew says, “I think it’s a concern within Australia with the big companies releasing surprise announcements, like AMP’s latest, and I think on a wider scale it’s the conflict with Iraq.”

TheASXShare Ownership Survey for 2002, released last week, also reflects shareholder uncertainty through a reduction in the number of Australians owning shares.

Around a quarter of a million people have left the Australian sharemarket between November 2000 and November 2002, with total share ownership, either directly or through managed funds, declining by 2 per cent to an estimated 50 per cent, or 7.3 million people.

The survey also suggests many of the investors leaving the sharemarket may have moved into residential investment property, with a decline in the number of shareholders in the age groups between 25 and 54.

However a more positive finding was that those investors still in the sharemarket are trading more, completing three trades per annum on average compared with one in 2000, and the average amount directly invested in the sharemarket has risen by just over 25 per cent to $35,800.