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Global conflict, inflation and supply chain issues combine to spook sharemarkets.
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Investor confidence plunges below pandemic levels
08 July 2022
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Investor confidence has plunged below levels seen during the depths of the COVID pandemic, according to an annual survey.
Rising inflation, global conflict and a sharemarket downturn have led to widespread uncertainty and rattled investors, found research conducted by the CA ANZ in June.
“Investor confidence in local and international capital markets is at the lowest levels we’ve seen since this survey was launched four years ago,” CA ANZ assurance and reporting leader Amir Ghandar said.
“The quadruple whammy of the pandemic, turbulent market conditions around supply chains, inflation, and national and international interest rate increases have put investor confidence on the ropes.”
The survey results came shortly after the third consecutive monthly interest rate rise by the RBA and plummeting values for digital currencies.
It found 60 per cent of investors have little or no confidence in crypto assets, and only 9 per cent expressed “a great deal of confidence”.
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Mr Ghandar said there was a clear divide on crypto assets between younger and older investors, with 71 per cent of the 18 to 44-year-olds bullish about them but only 26 per cent of 45 to 64-year-olds.
“Younger investors say they believe in the buzz around crypto – what they’re hearing about it on the news, social media and from friends – ultimately they believe in the technology,” Mr Ghandar said.
“Older investors are spooked by crypto’s volatility and they perceive a lack of regulation and transparency.
“In a sense both are right – blockchain has enormous potential to revolutionise integrity and transparency – but cannot yet replace all the key roles for regulation and traditional market and information integrity mechanisms.”
When it comes to broad economic threats, global political unrest looms as the biggest risk for one in four investors, up 10 percentage points on last year.
It feeds through to substantial declines in the capital markets, both domestic and international.
Compared with last year, investors reporting high confidence in the Australian sharemarket fell from 49 per cent to 39 per cent, while faith in international equities slumped from 34 per cent to just 24 per cent.
“This drop in confidence begs the question, how can we provide more certainty and confidence for retail investors?” Mr Ghandar said.
“Obviously, market conditions are a factor. Another thing that investors have clearly stated is they want better, more simplified and tailored reporting as part of the solution – and they want this done digitally.”
Digital financial reporting allows company data to be graphically presented and customised, and the survey found strong support among investors (70 per cent) to make it mandatory.
“Investors need a clear view out the front windscreen to make well-informed, considered decisions,” Mr Ghandar said.
“They don’t currently have what they need. A substantial majority of retail investors see today’s financial reports as overly complex and difficult to understand.”
The survey also found that auditors remained the most trusted player among those with investor protection roles, followed by stock exchanges, analysts and government regulators.
“In the good times, investors might be more likely to make choices based on advice from the media, friends, family and other advisers,” Mr Ghandar said.
“But when markets become volatile investors are prone to stick with safer investment options and look for more credible and robust forms of information.”
The survey, conducted from 10 to 15 June, was completed by more than 1,000 retail investors holding more than $10,000 in shares, in addition to other investments such as managed funds, property and superannuation portfolios.
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