Investors hit by poor returns are flocking to safe haven assets, with appetite for Australian shares down sharply, according to the quarterly ING Investor Dashboard Sentiment Index.
The survey of 3,792 investors included 307 Australian investors with liquid assets of US$100,000 or above and revealed Australia is now second last of 12 Asia Pacific countries in positive sentiment, down from equal second in March.
Less than half of Australian investors expected higher returns over the coming quarter, down from three-quarters in the previous review.
The prospect of further rate hikes was also damaging sentiment, while Australian investors continued to view a US economic recovery with caution.
ING Investment Management (INGIM) head of distribution and deputy chief executive Martin Donnelly warned of the downside of being too cautious, with INGIM predicting a strong US recovery in 2010.
“Investors with an overly bearish outlook for the US economy run the risk of missing out on return upside from Australian companies which are leveraged to a US recovery, which is our expectation,” he said.
Prospects in China continued to buoy Australian sentiment, although investors from other countries were more concerned about China’s chance of overheating.
More than a third of investors expected further share market falls, which was driving a shift to safer investments such as cash, gold and bonds, with only a third of investors considering high growth investments.
“The ongoing volatility in the Australian equity market has had a big effect on investor confidence and we expect many to retreat to the sidelines for the remainder of the year,” Donnelly said.
Despite the recent slowdown, the Australian share market should continue to rise. “Last year was a beta year. 2010 is shaping up to be an alpha year where true stock selection will be paramount,” he said.
