SMSF investor optimism has ‘fast evaporated’: Report
The downturn in both global and domestic markets at the end of 2018 has seen a renewed focus on bargain blue-chip stocks among SMSF investors, according to a recent CommSec report.
The latest CommSec SMSF Trading Trends Report said “high levels of investor optimism fast evaporated in the last quarter of 2018” as multiple worries combined to push investor sentiment into negative territory.
Some of this negative sentiment revolved around US-China trade tensions, the uncertainty of the US political process, the ongoing Brexit deadlock, the impact of rising US interest rates, global growth and fears of a yield curve inversion, the report said.
“This coincided with an emerging view that markets were overvalued, particularly the US technology sector, exemplified by the so called FAANG stocks – Facebook, Amazon, Apple, Netflix and Google,” it said.
“Resource companies and commodity prices became collateral damage in the US–China trade war, with oil prices in particular suffering major falls during the last quarter of 2018.”
Despite good employment and business conditions in the Australian economy, “the sheer weight of global woes saw the ASX200 slide from its high of 6374 in August to a low of 5468 in December, a fall of over 14 per cent”.
“Overall, the Australian market was down 6.9 per cent in 2018, its worst result since 2011,” the report stated.
For SMSFs, the report noted that there were also some specific domestic issues to contend with, including the Labor party’s proposed changes to dividend imputation, negative gearing and capital gains; the fall in residential property prices; and a looming Federal election.
The performance of global markets reversed some of the previous investment trends among SMSFs, the report said.
The focus for SMSF investors, the report said, has been finding quality at a reasonable price, rather than just ‘cheap’ stocks.
“This renewed focus on blue chip bargains has slowed the recent trend away from ASX20 stocks among SMSFs,” the report said.
Some of the previous reports by CommSec on SMSF trading indicated that the traded value of ASX20 stocks had fallen considerably as a proportion of total SMSF trading.
“In the six months to December, the top 20 accounted for 32 per cent of SMSF trades by value, compared to 33 per cent in the first half of 2018 and 34 per cent in the second half of 2017,” it noted.
“Now, however, there are signs that this trend may be slowing, with SMSF investors showing renewed interest in key constituents of the ASX20 and ASX50.
In the last six months, the report said trades on major miners had increased, with BHP trades rising 12 per cent in value and RIO rising 6 per cent.
“Across these stocks, 57 per cent of SMSF trades were buys. Similarly, while the value of SMSF trades involving major banks fell 11 per cent, all except ANZ showed a strong buy bias, especially Westpac and NAB,” it said.
The sell-off in the last quarter of 2018, the report said, also provided the opportunity for SMSFs to buy into some of Australia’s most respected blue chips at prices significantly lower than the market peak.
“They included CSL with trades up 80% by value, Macquarie Group, up by 31 per cent and Cochlear, up 85 per cent.
“Trading in all of these stocks showed a strong buy bias, while the healthcare sector lifted from 6.8 per cent to 8.3% of all SMSF trades by value. In the past, SMSFs have been criticised for not having enough exposure to these stocks – now it appears they were simply biding their time.”