1 out of every 5 Aussie retail investors have abandoned the ASX, says eToro

• eToro: 20% of local investors have ditched the ASX, amid push into foreign bonds, commodities & FX

• The move away from home equity is even more prevalent in the US

• Confidence has remained steady since Q122, despite concerns for state of local economy

The proportion of Australian retail investors holding locally-listed stocks has fallen by 20% in the past year says eToro.

According to the trading and investing platform’s latest research, whilst local equities are out, the popularity of asset classes including foreign bonds, commodities & FX has only firmed, reflecting the generally anxious state of global markets.

The findings – taken from a quarterly survey of 10,000 retail investors across 13 countries – indicate after more than a year of turbulence, Australian retail investors have pulled out their thumbs and gotten their portfolios a bit better diversified.

“They are looking further afield for opportunities in different markets and asset classes, with less ‘home bias’,” the report suggests.

The data shows older Aussie investors exhibiting a stronger ‘home bias’, so they’re more inclined to invest in domestic equities.

For Aussie retail investors aged 55 and above, a full two-thirds are currently invested in domestic equities.

For those aged 45-to-54, 56% are invested on the ASX.

This number continues to decline with the fickle-hearted cohort of younger investors.

eToro reports that for retail investors aged 35 to 44, 40% are invested in domestic equities, with only 31 per cent of 18-to-34-year-olds being invested in the local market.

This decline in ‘home bias’ among younger Aussie retail investors indicates a generational shift to diversifying portfolios with foreign equities and bonds.

Fickle. But also clever.

Home and away: Australian investors still hold more local interest than global peers

The percentage of Australian retail investors with exposure to domestic equities has fallen from 64 per cent  in Q1 2022 to 51 per cent in Q1 2023 (20 per cent or 13 percentage points). Despite this drop, Australian investors continue to be amongst the world’s most invested in home grown equities.

The move away from the home equity market is more prevalent in the US, where the proportion of retail investors holding domestic equities has fallen from 60 per cent in Q1 2022 to 42 per cent in Q1 2023 – a 30 per cent, or 18 percentage point, drop.

By comparison, in the EU where no-one knows why they do anything, there are stark country-by-country differences, but the proportion holding domestic equities has remained stable at 45%.

The Spaniards betrayed a pronounced decline in home bias down 21%, with 37% holding domestic equities, whilst Italy, Poland and the Czech Republic bucked the trend at 38% 45%t and 35% respectively.

Josh Gilbert: I am totally unsurprised (by anything, anymore) 

Josh Gilbert, eToro’s legendary Sydney-based market analyst, says it’s no surprise to see investors looking overseas to diversify their portfolios and tap into global investment opportunities.

“The ASX200 was one of the world’s best performing markets last year, but this year, the local market has underperformed when compared to the US or Europe.

“It’s also never been easier or cheaper for investors to take advantage of the diversification and investment opportunities in the rest of the world, with more ETFs and commission free investing”.

Whilst domestic equities have declined in popularity, the proportion of Australian investors holding stocks in foreign-listed companies has remained about the same, with only a 5% decrease since last year. Pronounced rises were seen in markets such as the US (25% increase) and the UK (12% increase), with the EU seeing a 7% increase.

Lacklustre markets drive diversification 

After 15 months of faltering markets, Australian retail investors are increasingly diversifying into different asset classes; the percentage holding commodities has jumped from 16  to 29%, those with foreign bonds has risen from 7 to 11%, those with alternative investments (for example, real estate) is up from 24  to 25%.

Those with FX exposure have almost doubled to 15%, whilst those with crypto exposure have remained steady at 23%.

“It’s surprising to see Aussie investors increase their commodity exposure given the asset’s weakness this year, but I think we’re seeing plenty of optimism from investors over the re-opening of China. Australian investors know very well that China will be looking to Australia to restock on commodities after years of limited trade, particularly when it comes to copper and iron ore. Iron ore is Australia’s most exported commodity and is one of just a handful of commodities in the green this year, so the increase in exposure, although broadly surprising, makes a lot of sense,” added Gilbert.

“This latest survey also shows a rise in investors holding international bonds in their portfolio compared to last year. This may be a smart diversification move with bond yields now the highest in over a decade, after their dramatic price falls last year,” he said.

Aussies remain confident, despite state of economy, inflation

The latest Retail Investor Beat also found that Australian retail investor confidence has remained the same since this time last year, with 76 per cent being confident in their portfolios,  same as last quarter, and in Q1 2022. Over half (59 per cent) have not changed their investment contributions yet in 2023.

In terms of risks, the state of the Australian economy is now the biggest perceived threat amongst retail investors, with 20 per cent citing this, whilst rising inflation (19 per cent) has risen to become the second biggest perceived threat.

The post 1 out of every 5 Aussie retail investors have abandoned the ASX, says eToro appeared first on Stockhead.

asx
iron