Treading water

by David Taylor


Since the end of the recent bull market, the S&P/ASX200 has fallen almost 24 per cent. On-going sovereign debt concerns, as well as turmoil in the Middle East and other factors, have prevented investor appetite from taking off. Just last month the S&P/ASX200 slipped 0.3 per cent. Fact is, the share market is trading in a relatively narrow range and, at this stage, doesn't look like breaking out of that range.


A recent survey by the Australian Securities Exchange, however, could leave investors scratching their heads. It suggests the number of Australian adults owning shares (including via managed funds) is up 41 per cent on 2008. The number of investors owning shares directly was more modest but still significant - around 30 per cent. That's up from 25 per cent in 2008.


The survey suggested respondents not currently in the market were also looking to purchase shares "at some stage"...18 per cent in fact. They told the ASX they would, however, like to be more educated before taking the plunge.


So while there does seem to be an increase in share ownership, I think the survey reflects perhaps a slightly different reality to what we may think. It says investors have been convinced that Australia is better off than most developed countries and hence they're keen to hold onto some equity, but that's where it stops. It's clear people out of the market are not itching to get in.


You see you need more than just share ownership to lift a market. It was not surprising to see new investors enter the market at such low levels (back in 2009). There will always be those out there looking for a bargain. What's more significant is that investors owning direct shares only increased by 5 per cent over the last 3 years and that those out of the market are not enthusiastic about entering it.


I get the impression the market is somewhat polarised. Those who are hopeful and see the market as representing good value at current levels, and those who are prepared to just sit tight. To get some momentum in the market though, both camps need to be on the buy side.


David Taylor


The content in my blog is non advisory, please do not interpret this as advice in any way shape or form. These are just my thoughts and nothing I say should be acted upon.

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