Retail investors get cautious on capital markets

Financial planners and retail investors are supporting a wider range of capital market vehicles than ever, but are becoming more discerning in doing so, according to KPMG’s Capital Markets Survey 2004-05.

The crop of ‘cash box’ raisings over the financial year were particularly popular with ‘mum and dad’ investors, according to KPMG’s executive director of corporate finance, Andrew Leithhead.

“The likes of Macquarie and its Capital Alliance cash box attracted the base of retail investors who already supported Macquarie’s more straightforward Initial Public Offerings (IPOs),” Leithhead said.

Leithhead said retail investors were becoming more selective in which IPOs they supported, the enthusiasm of the mid-90s dampened by memories of the poorly performed second tranche of Telstra shares, and more recently the rises in interest rates and fall in property prices.

“In the last year the markets returned more money to investors ($58.7 billion through share buy-backs, dividends and the cash component of public takeovers) than the $35 billion they raised, which is a symptom of uncertain investors sitting on the fence,” Leithhead said.

However, he added the queue of retail investors who missed out on the placement of Tattersalls shares was a sign that most decent offerings would garner support.

“With a selection of fully franked dividends currently exceeding cash yields… retail investors can’t afford to have their do-it-yourself super funds holding 40 or 50 per cent cash.”

The biggest question mark hanging over capital markets would be the shape of the final Telstra sell-down, Leithhead said. He believed the format most likely to attract retail investors was another instalment receipt program like that seen in the second sell-down, where investors pay for their shares gradually but receive all the dividend income from day one.