Australian investors who trade shares online have been beset by levels of fear and poor sentiment last seen in 2008 when the global financial crisis (GFC) hammered markets, an Investment Trends report found.
The 'Investment Trends Second Half 2011 Australia Online Broking Report'surveyed more than 7000 active share traders between November and December.
The survey shows investors have felt the negativity since August 2011.
"The sentiment is really, really low. People are scared and they've given up as capital gains expectations have also collapsed," Investment Trends senior analyst Pawel Rokicki said.
"When you look at the valuations, they're not actually as bad as they were in the middle of the GFC so the stock market has not [performed] that poorly."
The report said traders' expected returns had nosedived.
"Expected market returns for the following 12 months (excluding dividends) fell from 13 per cent in December 2009 to 8 per cent a year later and a mere 2 per cent in December 2011. But there is light at the end of the tunnel: The vast majority of share traders see Australian shares as undervalued," the report read in part.
Rokicki said this was a direct result of traders readjusting to market pessimism.
"People are exhausted from constantly receiving bad news so what we saw was, in the middle of the GFC the level of fear was very high, then mid-2009 once things started improving, [the fear] dropped quite significantly," he said.
However, the majority of traders saw Australian stocks as undervalued.
The report found that the number of people who had actively traded online rose by 20,000 between May and December 2011. The number of people who traded online at least once in 2011 stood at 630,000, down from a recent peak of 650,000 in May 2010.
"Against that backdrop, it's actually quite encouraging that the number of online share traders has increased, but having said that the volumes are still very low," Rokicki said.
Smaller deep-discount providers continue to lead on customer satisfaction with Bell Direct increasing its lead, followed by CMC Markets Stockbroking and then netwealth, the report found.
Satisfaction with online brokers CommSec and Etrade was also very high.
Rokicki said brokers providing excellent service are seeing the fruits of their efforts, particularly as their share of the frequent-trader business is growing.
Half of active online share traders named CommSec as their primary broker, while Etrade came second with 16 per cent of primary broking relationships.
Westpac Online Investing and National Australia Bank OnLine Trading were third and fourth, respectively.
Traders based their investment decisions mainly on analysts' reports when deciding which stocks to buy and when to sell them, the report showed.
