Sharesies members looking bullish again

Online trading platform Sharesies, which now has $2.5b in funds under management, has dug into the behaviour and sentiment of its 500,000 members to release its first investor index report.

Thursday, July 20th 2023, 8:00AM

by Andrea Malcolm

After an all time low in March (and news that Sharesies would have to cut jobs in the face of the coming recession) member confidence levels are now at their highest since September 2022 according to the Sharesies Investor Index.

In the past three months depositing and investing activity has become more bullish and sentiment is currently more optimistic, Sharesies reports.

Q2 saw a steady increase in the total value of buys and sells with an average net buy/sell ratio of 1.07. While the difference between buying and selling values were fairly constant, there was a steady increase in the total value of both buys and sells resulting in June being the second highest trading month since Sharesies launched in 2016.

The net deposit ratio, which measured the flow of funds in and out of Sharesies investment and savings products, saw a strong up-tick from mid-May. In the first week of June there was a deposit of $2.60 for every dollar withdrawn giving a year to date high ratio of 2.6. This was driven by an increase in deposits towards investing but also the launch of the Sharesies Save product.

To measure the risk appetite of members, Sharesies looked at the percentage of investing in individual companies versus investment funds (managed funds and ETFs), reasoning that a higher percentage invested in companies (PIC) may indicate higher confidence, with investors prepared to take a risk on their company picks, whereas in periods of lower confidence investors tend to seek more diversification via funds. Over the past three months, Sharesies saw an upward trend in PIC, holding consistently above 80% – its highest since late 2021.

The most popular equities among the Sharesies investor community were Air New Zealand, Tesla, Apple, Auckland International Airport and Mainfreight. Three ETFs; the Smartshares US 500 Fund, Smartshares NZ Top 50 Fund, and Vanguard S&P 500 were the most popular funds, followed by Pathfinder Global Responsibility Fund and Pathfinder Global Water Fund.

Investors experienced higher volatility through January and February, but since March volatility smoothed off and pricing was more stable for many of the most popular instruments on Sharesies.

The report says movements in the Sharesies Index over the past three years have reflected major economic events. A steep drop in response to the COVID-19 in August 2020, was followed by rapid recovery in September 2020 as markets rebounded. There was a sustained period of confidence and extreme confidence through September 2020 to April 2021. Some of the factors that may have influenced this could be retail investors having more disposable income through periods of lockdown and more time to devote to investing. This was coupled with a sustained period of bull market conditions, plus the rise of meme stocks.

From September 2021 through to January 2023 confidence steadily eroded as bear market conditions emerged, the Ukraine war began, cost of living increases set in, interest rates continued to track upwards and property prices trended downwards. This seems to have contributed to investors feeling cautious or concerned through early 2023.

Signs of optimism have slowly emerged since January and strengthened through May and June, with investors finishing the first financial quarter of FY24 with a balanced level of confidence. Looking at other signals in the market, optimism appears to be emerging at a macro level too, with the Reserve Bank announcement on 14th July to hold the official cash rate, signalling a possible end of a cycle of increasing interest rates aimed at curbing inflation and cost of living increases.

Tags: Sharesies