Investment Trends: Investor fear level returns in March

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After investor concern levels fell to a forty-one month low of 5.9 out of 10 in February, fear levels have bounced back to 6.3 in March against a backdrop of increased market volatility.

The March 2013 Investor Intentions Index, released this week, is a monthly report that takes the pulse of Australian investors’ sentiment and investment intentions, and is based on the responses of over 800 investors per month.

“Investors are not back to panic stations yet by any means, but were feeling much more cautions in March than in February,” said Investment Trends Analyst Kristin Bjerregaard. “Investors expressed increased concern over last month’s volatility, Cyprus/Europe contagion and safety of their superannuation.”

Return expectations decreased
In March, the average investor expected the market to be 6% higher in next twelve months (excluding dividends), which is 2 percentage points lower than their expectations in February, but still 2 percentage points higher than the average for the last 12-months.

62% of investors expected the market to increase in the next month, which is 29% more than in December 2011, but down from 74% in February.

“We found more people intending to increase cash holdings in the short term in March,” said Bjerregaard. “However, there is still some willingness to move long term cash off the sidelines.”

“For the second time in the last 3 months, more people plan to sell down term deposits than increase their exposure. This did not happen at all last year.”

“Despite the increased fear level, views on the Australian economy are actually quite positive,” said Bjerregaard. “61% think the Australian economy will show healthy growth over the next 12 months, a 19 month high, and only 30% of investors think we are in a second wave of the GFC, a 19 month low.”

Low interest rates are prompting increased interest in property investment
“Two thirds (65%) of investors still expect the next interest rate movement to be downwards, though this is notably lower than last month’s four-in-five (79%) expecting a cut,” said Bjerregaard.

“Low interest rates and market uncertainty are also prompting a large rebound in interest in investment property with more planning to buy than sell, and by an increased ration versus February.”

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