The federal Budget has done nothing to improve shareholder confidence, which has fallen 3.3 per cent in May, says the Melbourne Institute.
According to the GPS-Melbourne Institute Leading Index of Shareholder Confidence – which is based on a survey conducted on 14 May – a further decline in shareholder confidence is expected in the coming months.
Melbourne Institute senior research fellow Sam Tsiaplias said the fall in confidence is part of a depreciation trend that began in mid-2014, and was only briefly interrupted after rising 6.6 per cent in February.
“There’s been something of a roller-coaster rise in shareholder confidence this year and while February’s rate cut buoyed investor sentiment, it’s clear that this was only a temporary event and that the negative trend has resumed despite the latest Reserve Bank rate cut this month,” Dr Tsiaplias said.
GPS director Andrew Thain said that worsening investor confidence will impact mid and small companies intending to raise capital in the coming months.
“We’ve seen a higher number of retail shareholders showing reluctance to participate in capital raisings unless they can see compelling value.
“This trend is likely to continue on weaker confidence, which will place cash-flow pressure on companies and will lead to greater agitation towards boards and how aligned their strategic plans are to improving shareholder value,” Mr Thain said.
According to Melbourne Institute, the result is also a reflection of expected market conditions.
Volatility is predicted to be greater in the coming three months than observed in the three months prior, the index found.
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