Green shoots taking root in the ASX?
Activity is picking up in the Australian stock market, but doubt remains on whether it is a full-blown recovery
Australian online investors are slowly returning to the market after horror runs leading up to the end of 2008 and early into 2009.
The question remains though: is this an actual recovery or a false dawn?
E*Trade managing director Stuart Sayers said the low point of the market was around December 2008 and January 2009.
“By that stage people had gone through the shocks in the back end of last year and a lot of them had either pulled out, or lost a lot of money, or both,” he said.
“Volumes and new customer take up in December were very low. However since December there has been a steady progression where every month is better than the prior month on both volume and account openings.”
Comparing June to January, the volume of total trades doubled and new account openings were up 30%, he continued.
But there was now a change in mentality for both active traders – those completing more than 10 trades a month – and investors returning to the market.
“Anecdotally, a lot of [active traders] have talked about how they may have changed their approach,” he added.
“If they weren’t closing out positions at the end of the day a year ago they are certainly doing it now. The volatility has increased so their response is to reduce their exposure so there is less risk overnight.
“That is echoed by some of the investors now who are no longer looking at a buy-and-hold strategy – their belief is that the market is going to trade in a band and it is going to be more about getting in for a week or a month or a six month period rather than two or three years.”
E*Trade clients were also accessing different products now, with volumes of Exchange Traded Funds (ETFs) up more than 100% in the first half of 2009.
“It has been slow to catch on here but I think that the recent activity of last year has forced people to re-look at their cost structures to get to market and things like online brokers and ETFs start to look pretty attractive,” he said.
“ETFs are a good example of a trend towards products which have previously been the domain of institutional investors or large scale retail funds becoming available to smaller retail investors.”
The popularity of online trading was also increasing as investors decided they would do it themselves, Sayers added.
“If you look at the total share of trading that is done online, in December it was 11.2% and it has now grown pretty steadily to 13.5%,” he said.
“That is totally consistent with people realising they have paid a lot of money for advice and lost a lot of money who are now going to back themselves.”
