Investors Jittery Over Equity Market

September 30 - South African investors are eyeing global trends warily and acting accordingly. This is seen in the results of the monthly Investment Management Investor Confidence Index managed by Sanlam and conducted in the middle of September.

South Africans - hugely influenced by the goings-on in the United States and Britain - were concerned about the probability of a market crash, and Sanlam said that this was the highest rate of concern that the confidence index had ever recorded. "Institutional investors were especially bearish on this account," explained Frederick White, head of research at Sanlam Investment Management, "placing the average probability of a crash at 26%, a more than one in four chance that the markets will crash."

White explained that these sentiments were to be expected, considering what was happening in the rest of the world. "This is probably not surprising given the news flow at the start of the survey, which saw the collapse of the more than 150 year old Lehman Brothers, the buy out of Merril Lynch to prevent it from going under and talks of more struggling US bell-weather stocks," he said.

40% of respondents in the Investment Management Investor Confidence Index said that they expected the market to decline even further on the day after the market had already seen a 3% decline. This, too, did not surprise White, who noted that it was the most negative decline in sentiment since the survey's inception.

"Given the severity of the fall in markets prior to the survey and during the first half of the survey, this is a very rational response and illustrates that investors are awaiting the right buying opportunity once they are comfortable that the risks in the markets have subsided somewhat," said White.