Investor fear levels drop to 40-month low

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Investor fear levels are at a 40-month low and business confidence is on the up, according to new market research, though this doesn’t necessarily mean property investment is likely to rise.

A report produced by Investment Trends says falls in investor fear throughout 2012 were not translating into higher return expectations and the intention to invest - until now.

The Investor Intentions Index 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.

Roy Morgan Research has also found that business confidence increased last month to 122.5, up 7.7 points from 114.8 in December 2012 and is now at the highest level since April 2011.

The report says the increase in confidence is likely due to the fact that more businesses now consider that economic conditions in Australia over the next twelve months will improve.

Norman Morris, industry communications director at Roy Morgan Research, says the increase in business confidence in January is the result of a number of positive factors simultaneously impacting on the business outlook, but warns it’s too early to say if this will be an on-going trend.

 “Despite the current positive outlook, it remains to be seen whether this trend can be sustained as the market is likely to react very quickly to any negative news either overseas or during the current reporting season.”

Investment Trends senior analyst, Recep Peker, tells Australian Broker that investors’ fear levels have been dropping steadily since late 2011, when they were at levels last seen during the depths of the financial crisis.

Peker says that, while much of this improved confidence is likely to show itself in increased investment in the stock market and other areas, rather than in residential property, there are positive signs in that area as well.

The proportion [of investors] who feel now is a good time to borrow to invest is the highest it’s been since we started a year and a half ago (41%).”

He says that, up until the end of 2012, the overall decline in fear levels had not translated to an increase in investors’ 12 month market return expectations, which have been hovering around the 3% to 4% mark (excluding dividends) since the beginning of 2012.

“Now, for the first time, we have seen a big spike in investors’ market return expectations.”

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