Australian retail investors have been actively participating in the recent sharemarket rally, which has propelled the ASX to record levels. Data indicates a surge in retail trading volumes, particularly in September, with investors targeting high-flying stocks such as DroneShield and several lithium producers. However, fund managers are cautioning that this enthusiasm may lead to investors buying at market peaks, echoing concerns seen with physical gold purchases.
Morgan Stanley reported that online retail investors accounted for over 6 per cent of total ASX trading volumes in July and August, before moderating to 5.2 per cent in September. The traded value for retail investors last month reached $22 billion, significantly above the long-term average of $14.4 billion. Notable net buys included Cobram Estate Olives and Botanix Pharmaceuticals, a company focused on skin infection and disease treatments. Conversely, retail investors were net sellers of Brainchip, Weebit Nano, and Regal Partners.
Atlas Funds Management chief investment officer Hugh Dive attributes this trend to two main factors: increased cash flow from post-reporting season dividends and a ‘fear of missing out’ (FOMO) as the S&P/ASX 200 Index surpasses 9000 points. He noted that stocks like Mineral Resources and Pilbara Minerals have experienced substantial gains recently. Dive also drew a parallel between the current market behaviour and the rush to buy physical gold at record prices, highlighting the elevated price-to-earnings ratio of companies like DroneShield, a company that develops counterdrone solutions, relative to global tech giants like Nvidia.
Despite the increased retail activity, institutional investors remain the primary drivers of trading volume on the ASX, accounting for 86 per cent of the total in September, according to Morgan Stanley. The spike in retail trading coincides with a 24.4 per cent rally in the ASX 200 from its April low to the end of September, with small and mid-cap stocks outperforming large caps. The increased trading activity has also boosted profits for major stockbrokers, including CommSec, Ord Minnett, and Shaw and Partners.
