28/05/2009 - 00:00

Investors not ready to brave the market

28/05/2009 - 00:00

Bookmark

Upgrade your subscription to use this feature.

IT is the time of year when the agribusiness marketing campaigns run hot, margin lenders boost their advertising spend and an array of exotic investment product spruikers start selling.

IT is the time of year when the agribusiness marketing campaigns run hot, margin lenders boost their advertising spend and an array of exotic investment product spruikers start selling.

At the end of every tax year, investors pile into so-called tax-effective investments that offer upfront deductions.

But this year, a combination of volatile markets, poor investor sentiment and the collapse of two major agribusiness providers means far fewer will seek out the tax-effective sector.

Jeff Glossop, founder of Bunbury-based Penny Wise Investments, said most of his clients weren't willing to brave the market in any form just yet.

"People are hesitant," Mr Glossop said.

"They are just sitting on their hands for the moment."

At last count, there was $1.2 trillion sitting in bank deposits, according to banking regulator APRA, up more than $380 billion from two years ago.

The price of safe-haven gold has risen as dramatically as the share market has fallen, and has only retreated recently when the share market regained some ground.

Adviser Edge managing director Shane Kelly said a combination of legislative uncertainty and the collapse of Timbercorp and Great Southern meant the agribusiness sector would this year attract about $500 million, which is 40 per cent of its usual inflows.

"There's certainly some uncertainty as to what a senate inquiry might bring," Mr Kelly said.

InvestSMART founder Ron Hodge said the level of interest in floats was a good indication of investor appetite.

In 2006, the combined market capitalisation of the 180 companies to list on the stock exchange was almost $20 billion, according to InvestSMART data.

The following year, 250 companies floated with a market cap of more than $17 billion.

Mr Hodge said the abundance and success of numerous small floats in 2007 showed risk appetite was getting carried away.

In 2008, when the market started to tumble, just 70 companies with a market cap of just more than $3 billion listed.

In the first five months of this year, just seven companies with a combined cap of $280 million have floated.

Perth-based Life Financial Planners director Marijana Ravlich said investors were still hurting from the downturn.

"People are more inclined to invest in capital protected products where in the worst case scenario they will receive their money back," Ms Ravlich said.

Capital protected products sit under the structured product banner and have built-in insurance that protects an investor's original capital, for a fee.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options