Confidence returns as traders get active and more adventurous, CMC Markets survey says

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  • Traders get savvy with social media tools – websites, forums and blogs top the list
  • SGX gets thumbs down while Chi-X more warmly received; almost one in four think the ASX is government owned
  • CMC Herd Index shows traders continue to grapple with timing the market

Traders are showing greater signs of confidence and are tackling more adventurous investments according to the latest Share Trader Insights Survey launched today by CMC Markets Stockbroking.

CMC’s bi-annual Share Trader Insights Survey measures the trading behaviour of over 500 active share traders and compares the results with previous surveys conducted in 2010.

Overall, confidence is on the rise with 40% of traders planning to invest more money into the share market and only 18% are planning to do nothing – a marked drop from the 33% planning to sit on their hands in the H2 2010 survey. Trader confidence is also reflected by a spike in the number of investors wanting capital growth, rising to 30% from 25% since the last survey, while wealth preservation as an investment goal has fallen to 13% from 15%.

Banks and major resources companies such as BHP Billiton and Commonwealth Bank continued to dominate traders’ top 25 stock picks, but there were some signs of further diversification with companies such as Bluescope Steel, Qantas, Commonwealth Property Office Fund and JB Hi-Fi all increasing in popularity.

“The fact fewer investors are opting to sit on their cash is a strong sign of confidence. It’s a big departure from previous findings which showed investors were either cautious about trading or largely sticking to the large names in domestic equities,” said David Land, chief market analyst with CMC Markets. “Investors are again looking at share trading as a means to grow, rather than protect, their wealth.”

Getting savvy with social media

CMC Markets also surveyed traders’ use of social media and online tools for gathering information and increasing knowledge.

Online articles (22%) and online guides (15%) are the most important sources of information for increasing trading knowledge, followed by more traditional media forms including personal finance magazines (13%), newspapers (13%) and trading magazines (10%). According to the survey, trading tips are most in demand (19%), followed by analyst reporting (14%) and commentary (12%).

Looking at social media, trading websites are the most popular forms of social media for increasing their level of investment knowledge (used by 57% of traders) with forums, blogs and webinars also high on the list.  Facebook gained favour with only 9% of traders and was marginally more popular than Twitter with 8%. By age, 25 -34 year olds comprised almost half of traders who used Facebook and 59% of those who used Twitter were under 35. Meanwhile investors aged 45 and over were more likely to use an iPhone.

“The research confirms the social media phenomenon is extending to our trading habits with trading websites and i-Phone apps considered a useful source of information. This is consistent with our experience; CMC has seen a steady increase in traffic to our online trader tips and blogs,” said Mr Land.

SGX gets thumbs down while Chi-X more warmly received

Traders were also quizzed on their reaction to current events including the proposed takeover of the Australian Securities Exchange (ASX) by the Singapore Stock Exchange (SGX) and the entry of alternate exchange Chi-X to the Australian market.

Only half of investors knew the ASX is a publicly listed company and 24% think it is government owned. Therefore it’s not surprising 32% said they were opposed to the takeover, 35% were supportive and 32% were neutral.

By contrast, 43% were neither opposed or supportive of Chi-X, 35% were supportive and only 22% were actually opposed.

“The fact people don’t mind another entrant into the market, yet are opposed to a takeover of the ASX tells us there is much emotion and nationalistic sentiment tied to the ASX with many people believing it’s a state-owned asset of national significance,” said Mr Land.

Herd Index shows timing the market is still tricky for traders

The survey also encompasses the CMC Markets Herd Index, which measures trading patterns against market movements. The Herd Index has continued the pattern of previous surveys with 44% of traders moving money into the market during January 2011 as the All Ordinaries Index rose.

“The Herd Index shows investors are continuing to move money in to the market when it is on its way up, then out when its going down, meaning they are entering and exiting at the wrong times,” Mr Land said.

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