Investor confidence plummets amid market uncertainity, finds CA ANZ

Amir Ghandar, Assurance and Reporting Leader at CA ANZ

A new survey shows investor confidence in local and international capital markets is now lower than it was at the depth of the COVID-19 pandemic. Plunges in the sharemarket, ongoing global political unrest, inflationary challenges and associated broader economic uncertainty all led to the concerning results in the survey conducted from 10-15 June 2022.

What were the insights the CA ANZ survey?

The annual Chartered Accountants Australia and New Zealand (CA ANZ) Investor Confidence Survey comes off the back of further Australian interest rate rises this week. The survey was completed by over 1,000 retail investors holding more than $10,000 in shares, in addition to other investments such as managed funds, property and superannuation portfolios.

“Investor confidence in local and international capital markets is at the lowest levels we have seen to date since this survey was first launched four years ago. The quadruple whammy of the ever evolving COVID-19 pandemic, turbulent market conditions around supply chains, inflation, and national and international interest rate increases have put investor confidence on the ropes,” CA ANZ Assurance and Reporting Leader, Amir Ghandar commented.

Crypto investment

When it comes to investing in crypto, younger and older investors have polarised views:

  • 71% of the 18 – 44 age group are confident to invest in crypto-assets, almost as confident as they are investing in the capital market (79%)
  • Only 26% of 45 – 64 age group are confident investing in crypto-assets.

“Younger investors believe in the buzz around crypto – what they’re hearing about it on the news, social media and from friends – they believe in the tech. Older investors are spooked by crypto’s volatility and they perceive a lack of regulation and transparency,” Ghandar said.

“In a sense both are right – blockchain has potential to revolutionise transparency – but cannot yet replace all the key roles for regulation and information integrity mechanisms.”

Retail investor confidence

The number of investors citing global political unrest as the biggest risk to the domestic economy has jumped by 10% since last year now representing a quarter of investors.

Retail investor confidence in capital markets is tumbling, with those reporting high confidence in both the domestic (39%) and international markets (24%) down by 10% on last year.

“This drop in confidence begs the question, how can we provide more certainty and confidence for retail investors? Obviously, market conditions are a factor. Another thing that investors have clearly stated is they want better, more simplified and tailored reporting as part of the solution – and they want this done digitally” Mr Ghandar further commented.

Digital reporting

Some of the key findings in relation to digital reporting included:

  • 77% of investors view financial reports as “somewhat to very” difficult to understand
  • 86% believe digital financial reporting would improve this
  • 70% “support or strongly support” mandating digital reporting in Australia.

Digital reporting enables customised infographics, tables, and graphs to present data and analytics in an easily understandable fashion. A common language is used to ‘tag’ each item being disclosed, making it machine readable, consistent and quick to navigate.

“Investors need a clear view out the front windscreen to make well-informed, considered decisions, so that they can keep their finances on the road and growing. Investors don’t currently have what they need. A substantial majority of retail investors see today’s financial reports as overly complex and difficult to understand,” Mr Ghandar further commented.

“That’s why CA ANZ has been pushing for consistent digital reporting, and simplified reporting overall, to enable a better view into company performance and prospects,” Mr Ghandar said.

Auditors most trusted player

The Survey also found that auditors remained the most trusted player of those that have roles in helping to advance investor protection, followed by stock exchanges, analysts and government regulators. “In the good times, investors might be more likely to make choices based on advice from the media, friends, family and other advisors,” Mr Ghandar said.

“But when markets become volatile, as they currently are, investors are prone to stick with safer investment options and look for more robust data – and a Chartered Accountant.”