Investor hopes plummet after Brexit

Brexit has affected investor sentiment.

12-Jul-2016

By Sarah Kendell

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Britain’s decision to leave the European Union at the end of June was having a significant impact on investor sentiment in the United Kingdom and Australia, with both markets reporting markedly lower return expectations for the rest of the year, according to new data from Investment Trends.

The research firm reported Brexit had hit UK investors hardest in terms of sentiment, with data from its “UK Online Broking Report” showing UK investors had expected a 3.3 per cent annual gain in the stock market on 23 June, but immediately after the vote on 25 June sentiment had plummeted to the point where the average investor expected a 2.8 per cent loss.

A greater majority of UK investors also expected the local equities market to decline following the Brexit vote, with 55 per cent expecting a negative stock market outcome on 24 June after the vote result had come in, compared to just 13 per cent who thought the market would fall on 23 June before the vote.

At the same time, Australian investors’ expectations were also affected, with just 7 per cent of investors saying they wanted to increase their exposure to equities by the end of June, compared to 17 per cent who wanted to increase their exposure in May.

This was the lowest monthly sentiment the firm had recorded since October 2014, and was also reflected in Australian investors’ pessimism toward international investments – just 31 per cent planned to increase the amount of foreign assets in their portfolio, compared to 45 per cent the month before.

Investment Trends senior analyst King Loong Choi said political instability had contributed to declining confidence in local and overseas equities markets, leaving investors confused about where to turn to generate positive returns in the medium term.

“The last time we saw investor sentiment fall to these levels in 2011-12, investors flocked to safety in the form of cash and term deposits, however, this has not materialised so far this year,” Choi said.

“Instead, we’re seeing investors enter an environment where they are still on the hunt for capital growth, but are finding it increasingly difficult to identify investments over the coming year.”

He added the flight from traditional assets was leading to a resurgence in investor interest in unlisted managed funds, which appeared to offer more advanced strategies for protection against volatility.

“Investors’ interest in unlisted managed funds is being driven by their desire for greater diversification in portfolios, but what sets them apart from other investment products is their ability to give investors access to products and strategies which they cannot easily access or replicate themselves,” he said.

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