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Westpac Private Bank
investor sentiment indicator
insights into the investment
intentions of wealthy Australians
Quarter 2, 2012
Welcome to the latest release of our Westpac Private Bank
Investor Sentiment Indicator
As part of our ongoing commitment to developing a deeper understanding of the attitudes,
behaviours, needs and perspectives of high net worth (HNW) Australians, Westpac Private Bank
is delighted to release the latest version of the quarterly Investor Sentiment Indicator.
The Indicator is an aggregate measure of the investor sentiment of HNW Australians across
the following areas:
●● Expectations regarding the performance of the investment market.
●● Perception of their current financial situation.
●● Future investment intentions.
We would like to share with you the latest key insights and hope you find them of interest, given
that you are part of this HNW market.
The latest data from the Quarter 2 2012 survey reveals that HNW investor sentiment has moved
back into negative territory, with the overall sentiment score dropping to -10.9 from +3.6 in
Quarter 1, a result which is not surprising given the recent turmoil in global markets.
While HNW investors were starting to see signs of a possible global economic recovery in
Quarter 1, concerns about the Euro zone crisis and ongoing exposure to volatile markets have
many believing that there are no quick fix solutions to the inevitable contagion impact of these
geopolitical and economic challenges. Furthermore, many HNW investors continue to feel the
lingering and constraining effects of ‘post traumatic investment syndrome’ off the back of their
experiences during the Global Financial Crisis.
More broadly, the majority of HNW respondents in the study have a negative outlook on
economic growth and the current business landscape in Australia. However, they continue
to be more optimistic about the future than their Mass Affluent peers.
In terms of asset classes, cash still reigns as king. Wealthy Australians continue to rebalance
toward cash, albeit at a more measured pace than seen in previous quarters. The data also
indicates that HNW investors have little faith in equities in the coming quarter. Property is the
silver lining, relatively speaking, with more HNW investors likely to be happy than unhappy with
their property investments.
While these findings indicate a renewed level of cautiousness and pessimism, they also suggest
the emergence of untapped potential around new wealth opportunities, which we outline at the
end of this report.
We recognise that traditional approaches are not enough when it comes to creating, building
and protecting one’s wealth. Our role as Private Bankers entails seeking out insight-led solutions
which can help clients and their families achieve an enduring financial advantage in all market
conditions. We look forward to continuing that journey with you, our valued clients.
General Manager
Private Wealth
[email protected]
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Research background
Westpac Private Bank and CoreData have partnered to undertake research to understand the sentiments, investment
behaviours and service preferences of high net worth investors (HNWI) in Australia. The research looks beyond historical
data and builds on a tool which maps HNWI intentions.
This report does not attempt to summarise all of the data which has been collected, rather, it examines the predictive abilities
that the data provides in particular, the way in which HNWI sentiment is an accurate predictor of investment markets in a post
global financial crisis environment.
CoreData has been researching Australia’s HNWI since 2002. The survey deployed by CoreData pays particular attention to
asset class, investment type and product data to build a robust picture of the sentiments of Australia’s HNWI and how they
are likely to behave quarter on quarter.
The CoreData research panel has an estimated 17,000 Australians that satisfy the requirements of HNWI – namely investment
portfolio size of $1,000,000 or more outside both their superannuation and principal place of residence. Those with an annual
household income of $250,000 or more are also classified as HNWIs. More than 220 respondents from this group were included
in this latest HNWI survey. Mass Affluent respondents, by contrast, have between $50,000 and $750,000 in investable assets.
The research provides a rolling sample (2004-2012) which enables one to compare future intention with past results.
Interestingly, the research reveals that those who followed the predictions of wealthy Australians would have been better
off than those who kept invested in the ASX200 index.
The research was conducted between the 25 May 2012 and 5 June 2012.
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Investor sentiment
HNW investor sentiment is down for Quarter 2 (April – June) 2012
HNW investor sentiment has fallen in the quarter (Q2 2012) with the overall sentiment score returning to negative territory,
dropping sharply to -10.9, compared to the result of +3.6 in the previous quarter (Q1 2012).
While HNWI were clearly beginning to see some signs of a global economic recovery in Q1, the continuing turmoil in European
debt markets has led HNWI to believe that the issues of the global financial crisis have not been resolved and that markets
may have not yet bottomed out. The volatility and under performance of the ASX throughout Q2 is also likely to have impacted
investor confidence.
HNWI versus Mass Affluent Sentiment: Q2 2012
Neutral
Positive
-50
50
Negative
Mass affluent -23.5
54
0
-3
30
-35
35
-40
40
-45
HNWI -10.9
25
-2
5
-20
20
-15
-10
15
-5
0
5
10
The results also reveal that HNWI are relatively more optimistic about the future than the Mass Affluent segment (Q2 score
of -23.5), which is in line with previous surveys. More specifically, CoreData research confirms that sentiment among the Mass
Affluent typically lags HNWI by approximately 12 weeks.
The Westpac Private Bank Investor Sentiment Indicator continues to be an insightful predicator of the direction of Australia’s
investment market. The graph below overlays the Indicator with the ASX200 Index performance since Q4 2004.
40
7000
ASX200
6000
20
5500
10
5000
0
4500
-10
4000
-20
-30
4
3500
Q2
05
Q2
06
Q2
07
Q2
08
Q2
09
Q2
10
Q2
11
Q2
12
3000
ASX200
Investor sentiment indicator
6500
HNWI sentiment
30
Economic and business outlook
Despite the federal government’s forecast budget surplus, most HNWI expect an economic slowdown
●●
NWI are less positive than in Q1 2012 in their expectations that the Australian economy will grow at a faster rate
H
in the next quarter (a drop from 24.6% to 12.0%).
●●
lose to three in four (70.9%) HNWI expect the economy to slow down either slightly or a lot in Q3. This result
C
compares to 51.2% of HNWI respondents who felt this way in Q1 2012.
Comparing the next quarter to this past quarter, do you think the Australian economy will grow at a slower or faster rate?
80
HNWI Q1 12
HNWI Q2 12
Speed up
slightly
Speed up a lot
60
% 40
20
0
Slow down a lot
Slow down
slightly
No change
HNWI believe that the outlook for business remains bleak
●●
lmost two thirds of HNWI surveyed (63.3%) anticipate business conditions will worsen in the coming months. This
A
percentage reverses a recent more positive trend, where less than half (48.9%) of HNWI anticipated deteriorating
business conditions in Q1 2012.
●●
Only a very small proportion of HNWI (0.5%) anticipate much better business conditions next quarter.
Comparing the next quarter to this past quarter, do you think business conditions in Australia will be better or worse?
60
HNWI Q1 12
HNWI Q2 12
45
%
30
15
0
Much worse
Somewhat worse
Neither worse
nor better
Somewhat better
Much better
HNWI households have mixed expectations for the coming year
●●
ver two thirds of HNWI (67.3%) expect stable or improved financial positions for their households in the next year.
O
This is down from last quarter’s predictions (73.8%).
●●
nly a small percentage of HNWI anticipate that their household financial positions will be much better (5%) or much
O
worse (4.1%) in the next 12 months.
How do you think the financial position of your household will change over the next 12 months?
60
HNWI Q1 12
HNWI Q2 12
45
%
30
15
0
Much worse
Somewhat worse
Neither worse
or better
Somewhat better
Much better
5
Investor sentiment
HNWI less confident this quarter
●●
As noted previously, HNWI are less confident in Q2 2012, with an index score of -10.9 compared to +3.6 in Q1 2012.
●●
S imilarly, Mass Affluent sentiment remains negative, with the Q2 2012 Indicator down (-23.5) compared to Q1 2012
(-16.8). In fact, this quarter has signaled the lowest ever Mass Affluent sentiment level in the eight year history of the
Investor Sentiment Indicator.
HNWI Sentiment Indicator:
Q1 2012 versus Q2 2012
3.6
-10.9
-10.9
0
0
-23.5
-50
HNWI Q1 2012
HNWI versus Mass Affluent Investor
Sentiment Indicator: Q2 2012
50
HNWI Q2 2012
-50
HNWI
50
Mass affluent
Higher investment satisfaction for HNWI than Mass Affluent
●●
NWI are more likely than Mass Affluent investors to be happy with their current investments (41.1% versus 29.2%), possibly
H
reflecting the fact that HNWI are making better investment decisions and thus enjoying more satisfactory returns.
●●
However, satisfaction is down for both in comparison to Q1 2012 (48.5% versus 31.7%).
HNWI satisfaction highest with residential property and fixed term deposits
6
●●
oth HNWI and Mass Affluent investors are pessimistic about the financial market outlook for Q3 2012, with 61.2%
B
of HNWI and 58.7% of Mass Affluent investors believing that markets, in general, will worsen.
●●
HNWI relative satisfaction is highest with residential property and fixed term deposits, and lowest with direct shares.
Investor intention
The Investor Intention Indicator is a subset of the Investor Sentiment Indicator and measures investors’ future investment intentions.
●●
The overall future investment intention of HNWI has dropped slightly from -12.4 to -14.8.
●●
L ike the Investor Sentiment Indicator, there is a considerable difference in intent between HNWI and Mass Affluent,
with the latter considerably more negative about their future investment intentions (-29.7 versus -14.8).
●●
he difference between HNWI and Mass Affluent investors may be explained partly by more active investment
T
strategies of HNWI who are generally more willing to rebalance their portfolios in a timely fashion.
HNWI Intention Indicator:
Q1 2012 versus Q2 2012
HNWI versus Mass Affluent Investor Intention
Indicator: Q2 2012
-12.4
-14.8
-14.8
0
0
-29.7
-50
HNWI Q1 2012
50
HNWI Q2 2012
-50
HNWI
50
Mass affluent
Other research highlights
Investment activity to remain subdued
●●
Just over one in five (22.4%) HNWI are likely to make new investments in the next quarter, while only 29.2% plan to
invest further in an existing investment.
●●
Almost three quarters (72.1%) of HNWI also anticipate that they will ‘stay the course’ with their current investments.
Cash expected to maintain status quo
●●
he most popular asset for HNWI to rebalance towards is cash, with 30.7% looking to do so. This is slightly up on
T
Q1 2012 (28.2%).
●●
espite this, more HNWI believe that fixed term deposit rates will worsen over the next three months (52.7% for
D
Q2 2012 versus 29.1% for Q1 2012).
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HNWI have lost confidence in equities this quarter
The Investor Equities Sentiment Indicator measures investor sentiment towards equities.
●●
As with investor sentiment, HNWI equities sentiment dropped sharply, falling from +5.3 points in Q1 to -23.8 in Q2.
●●
NWI are only slightly more positive than the Mass Affluent respondents, whose sentiment regarding equities is still
H
negative (-25.9).
●●
ompared to Q1 2012, there are now more HNWI and Mass Affluent investors believing that the Australian share
C
market will underperform residential property (41.5% and 44.0% respectively).
●●
ore specifically, HNW respondents were most negative about international equities, with 66.2% believing that they
M
will perform poorly in the next quarter. Over half (54%) also feel that Australian share performance will be “somewhat
worse” or “much worse”.
HNWI Equities Sentiment Indicator:
Q1 2012 versus Q2 2012
HNWI versus Mass Affluent Investor Equities
Sentiment Indicator: Q2 2012
5.3
0
-23.8
0
-23.8
-25.9
-50
-50
50
HNWI Q1 2012
50
HNWI
HNWI Q2 2012
Mass affluent
HNWI are slightly more negative about the outlook for property this quarter
The Investor Property Sentiment Indicator measures investor sentiment towards both direct and indirect
property investment.
●●
As per the other indicators there was a fall in HNWI property sentiment compared to Q1 2012 (-11.1 to -14.6).
●●
cross the four indices, it is with the Property Sentiment that HNWI and the Mass Affluent are most on a par with each
A
other. In essence, both HNWI and the Mass Affluent recorded negative property sentiments, with the Mass Affluent
slightly more negative than their HNWI counterparts (-14.7 versus -14.6).
HNWI Property Sentiment Indicator:
Q1 2012 versus Q2 2012
-11.1
-14.6
-14.6
-14.7
0
-50
HNWI Q1 2012
8
HNWI versus Mass Affluent Investor Property
Sentiment Indicator: Q2 2012
50
HNWI Q2 2012
0
-50
HNWI
50
Mass affluent
Conclusion
The research reveals that, despite the uptick in sentiment in Q1 2012, HNWI sentiment has since fallen back to negative
territory. HNWI are still suffering the hallmarks of ‘post traumatic investment syndrome’ in the aftermath of the global
financial crisis and ongoing volatility of capital markets. They acknowledge that no matter how skilled they are at investing,
the markets are beyond their control, causing them to continue to retreat to safe haven assets like fixed term and
cash deposits.
It is clear that traditional investment approaches are no longer enough when it comes to creating, building and protecting
wealth. HNW Australians are re-evaluating their approach to managing their wealth, seeking out alternative yield
enhancement opportunities and wealth protection strategies.
There is also a considerable difference in sentiment between HNWI and the Mass Affluent segment, with the latter more
negative about their future investment intentions. Behaviourally, HNWI also adopt more active investment strategies than
their Mass Affluent counterparts.
Emerging investment opportunities
The research highlights that HNWI remain concerned about the global macro-economic backdrop and Westpac Private Bank’s
day-to-day interactions with our clients also reflects this. Many of our HNW clients seek to balance capital protection in order
to safely manage the risks in the market, yet also wish to be selectively opportunistic. To this end, Westpac Private Bank is well
placed to offer investment solutions that have undergone rigorous due diligence.
The desire for relative safety is reflected in the growing focus on domestic yield alternatives in light of limited medium-term
corporate earnings growth visibility. Solutions that clients continue to seek from Westpac Private Bank include a variety of yield
enhancement solutions across various asset classes including, but not limited to:
●●
orporate bonds: typically from sound issuers with sufficient premium to term deposit rates, good debt
C
serviceability, shorter terms and some resilience to the current economic backdrop. Westpac Private Bank has sourced
corporate bonds from the institutional market that meet clients’ investment preferences for corporates with an
attractive yield, up to a three-year maturity and strong underlying economic resilience.
●●
eal estate opportunities: highly selective yield-based opportunities within specific segments of the real estate
R
sector, with defensive characteristics and quality tenants.
●●
Equity yield solutions: solutions that take advantage of volatile equity markets to generate risk-considered income.
Evolving offshore opportunities
To supplement a finite number of avenues in domestic investing, more discussions are taking place with our clients about
offshore opportunities.
Despite the pessimism of HNWI towards international markets, we are witnessing rapidly evolving investment opportunities in
restructuring and distressed situations across the world, particularly in Europe. We anticipate that restructuring opportunities
will increase across private and public companies – particularly where some element of leveraged buyout is now exposing
balances sheets that are overly leveraged to the credit/economic contraction.
Against this global environment, having access to a spectrum of wealth capabilities and specialists to support and implement
the investment themes and manage risk is essential. Our Private Bankers, Investment Specialists and Strategic Advisers are on
hand to help you create an enduring financial advantage, irrespective of market conditions.
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Finally…
Westpac Private Bank was delighted to be recognised at the recent 2012 Australian Private Banking Council (APBC) Awards. The
APBC Awards are designed to recognise outstanding institutions and individuals within private banking, private wealth and
private client services. These awards include the results of APBC client surveys as part of the assessment and scoring process.
Westpac Private Bank won the coveted Outstanding Institution ($10m – $30m) Award. In addition, the quality of our team
was also acknowledged as team members took out four of the individual awards, namely: Outstanding Analyst, Outstanding
Associate, Outstanding New Wealth/Investment Adviser and Outstanding New Relationship Manager.
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Things you should know
The information in this update is current at July 2012. This information does not take into account your personal objectives, financial situation or needs
and so you should consider its appropriateness having regard to these factors before acting on it. Westpac Private Bank’s Financial Services Guide can
be obtained by contacting your private banker. This document provides an overview or summary only and it should not be considered a comprehensive
statement on any matter or relied upon as such. Information in this publication that has been provided by third parties and is given in good faith
and has been derived from sources believed to be accurate at its issue date. It has not been independently verified and Westpac Banking Corporation
ABN 33 007 457 141, AFSL No. 233714 (‘Westpac’) is not in any way responsible for such information. It should not be considered a comprehensive
statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group
accepts responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to
exclude liability for this material. Any projections in this document are predictive in character. Whilst every effort has been taken to ensure that the
assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account
known or unknown risks and uncertainties. The results ultimately achieved may differ materially from the projections. Past performance is not a
reliable indicator of future performance.
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