There’s a bear in there.

THE BOURSE WHISPERER: It’s winter time, which means waking the market out of its current bearish hibernation will be a very difficult task.

It’s no secret resources have copped a fairly hard time over recent months, which has been brought on by falling commodity prices, in particular iron ore, worries that the growth of the Chinese economy is set to stagnate.

Of course the rise of the Aussie dollar, although a boon for overseas travellers, hasn’t been as welcome by the export market.

Having said that, the greenback has fought back to reclaim some ground against its antipodean competitor.

This scribe was heartened to hear one analyst say that he expected the Aussie dollar to bottom out at around 93 to 94 cents, but then again it could be different – Brilliant work!

Still they run. It would appear investors can’t get out of the market quickly enough and are taking shelter under the doona with their ursine companions.

According to a recent study from Global Proxy Solicitation (GPS) – Melbourne Institute of Applied Economic and Social Research, investor confidence has taken a dive since February 2013.

This lack of confidence among Australian retail equity investors apparently centres on future returns and an increase in perceptions of volatility in the year ahead.

The Melbourne Institute’s findings tell us most of Australia’s retail investors don’t consider the recent Federal Budget to be of much concern and that it won’t have any meaningful impact on investments or investment strategies.

The latest GPS-Melbourne Institute Shareholder Confidence Index fell by 10.5 per cent in May 2013, putting it just 4.9 per cent above its value one year ago.

The survey also delivered a fall in ‘Expected Trading Intentions’ of 14.9 per cent – the biggest negative change (in trading intentions) since the Index was launched in May 2009.

The Expected Confidence Index lost 14.4 per cent and the Current Confidence Index fell 6.7 per cent both falling since February 2013.

“Investors have clearly become unsettled since February,” Melbourne Institute professor Guay Lim said.

“And these dramatic falls reflect their loss of confidence and their perceived fears of share market volatility for 2013.”

The chart below shows the performance of the GPS-MI Shareholder Confidence Index against the movements of the S&P/ASX 200 Share Price Index, which demonstrates how shareholders’ confidence in share markets has plummeted.


This second chart presents respondents’ buying intentions for various types of shares in May 2013 and it shows the fall in buying intentions across the board.


The latest survey shows that the main types of shares that investors are currently looking to buy are financials, energy and health, IT and consumer staples, but on a far lower scale than reported by February’s Index.

Similarly, future purchasing intentions remain focused on industrials, followed by metals and minerals and materials although intentions have strongly retreated since last quarter’s Index.

When asked for their opinions about the Federal Budget, 85.4 per cent of respondents to the survey said the Budget would not cause them to make any changes to their investment strategy and 70.4 per cent considered the government’s plan to return the budget to surplus by 2016 as not credible.

“It seems that in just three months, confidence has drained from Australian retail investors and their outlook for equities has become very pessimistic,” GPS managing director Maria Leftakis said.

“When we look at their responses to the government’s May budget, investors are worried about the state of the economy and are reluctant to play around with their investments.”

Leftakis said that in May, Australian retail investors indicated they had expectations of lower returns from their equity investments, supported by the fact that the expected returns input into the overall shareholder confidence index in May fell by 15.7 per cent in the quarter to 110 (down from 130.6 in February 2013).

Strong falls of 17.5 per cent and 11.9 per cent were also recorded in the current and expected volatility components, indicating that respondents expect share price volatility to be higher both now and into the future.