Investor sentiment rebounded substantially in the first quarter of 2012 following consecutive quarters of declining confidence, according to the latest research by CoreData.
The market research consultant's Investor Sentiment Research Report for the first quarter of 2012 found that while sentiment was still negative, it jumped by 5.6 points to -16.8, compared to -22.4 for the fourth quarter of 2011.
"Sentiment, while it is still negative, has improved and since we've seen consecutive quarters of declining sentiment, it's a positive sign that we have seen uplift this quarter," CoreData head of advice, wealth and super Kristen Turnbull said.
"Sentiment is highly correlated to the ASX200 Index so it tends to lag the ASX on the way up and lead it on the way down, so the jump we see of 5.6 points is in line with the 5.2 per cent rise we've seen on the ASX quarter on quarter."
The Investor Sentiment Index measured the confidence of 1004 Australian respondents throughout the survey period of 21 February to 5 March 2012.
The Investor Equities Sentiment Index remained in negative territory despite rising 13.7 points to -5.1 from -18.8 in the fourth quarter of 2011.
However, the jump should be treated as a substantial improvement in sentiment towards equities, Turnbull said.
"It's a positive sign that people are feeling a bit more confident, [although] the report also found greater optimism toward Australian shares than international shares," she said.
The report showed 69.1 per cent of respondents expected Australian equities to be stable or improve, compared to 50.5 per cent for global equities.
It also showed 25.8 per cent of respondents were looking to rebalance to cash, which was a slight decrease from the previous quarter.
While expectations had become more subdued, it suggested investors could not see a viable alternative to investing their money, Turnbull said.
"Cash does still remain the asset class that investors are most likely to rebalance towards, but what we have seen is a slight reduction in people's expectations for the performance of their cash," she said.
"Perhaps people are starting to re-evaluate the return on the investment from cash versus other assets."
Investor sentiment towards direct and indirect property only experienced minor movement, increasing by four points from -15.5 in the fourth quarter of 2011.
Turnbull said that while there were signs sentiment was improving, a continued upward rise in the index would depend on what happened in the global economy and Australia's political environment in the next three months.
