New confidence index shows SA investors remain confident

Sanlam Investment Management (SIM) today launched the country's first ever investor confidence index which showed that South African investors are exuding confidence and are positive about one year returns - despite the recent hike in interest rates, petrol and food prices. The Sanlam Investment Management Investor Confidence Index is run jointly by SIM and the Institute of Behavioural Finance, and is based on similar indices in two of the world' biggest financial markets.

Armien Tyer, MD of SIM, the asset management company within the Sanlam Group, said that as an objective measure of market sentiment, the index had an important role to play in South Africa. "The information offers insight into the mood among investors and indicates how significantly major market changes affect investment decisions. Over time, trends will be revealed which will allow us to make comparisons between financial markets and to compare current sentiment to that over comparable periods in the past."

Head of Research at SIM, Frederick White said the first set of results covered the five months from June to October and showed that short term fears had, for the moment, been allayed. "Investors believed that the market would now rise steadily. There was very little fear of a stock market crash. Emerging market growth was seen by respondents as reasonably secure in spite of a slowing down of growth in developed markets

"Local investors shared the sentiment held by many global investors that central banks would support global financial systems - and in the process help to protect financial markets from a real catastrophe," said White.

He said that forty percent of respondents believed the JSE was overvalued, "Not a single person surveyed thought the market was cheap. The fact that they still saw trend returns from an overvalued market indicated that they remain quite confident of positive earnings growth."

Chairman for the Institute of Behavioral Finance, Theo Vorster, said the survey was based on the well respected Yale School Management Stock Market Confidence Index conducted in the USA and Japan, "The advantage of the instrument is that it allows comparison with similar American data that has been collected since 1984, as well as Japanese data that has been collected during the last decade."

Vorster said the survey was conducted via a questionnaire on the second Monday of every month to a sample of 80 to 120 institutional investors and investments advisors, who participate anonymously. "The index is based on four categories of questions, namely the One-Year Confidence Index, Buy-on-Dips Confidence Index, Crash Confidence Index, and Valuation Confidence Index."

The index had received the formal endorsement of the Investment Management Society of South Africa (IMASA). From November, the SIM Investor Confidence Index will be published in the third week of each month.