2016 First Half Australia Trading Behaviour Report ... · Average return expectation (next 12 months, excl. dividends) 3,000 3,400 3,800 4,200 4,600 5,000 5,400 5,800 6,200 6,600

Survey Highlights

2012 Germany Trading Behaviour

Highlights from the Investment Trends

2016 First Half Australia Trading

Behaviour Survey

I-1Copyright 2016 Investment Trends Pty Ltd. 2016 First Half Australia Trading Behaviour Report. Confidential. Reproduction prohibited.

Report released: June 2016

Reproduction strictly prohibited

2016 First Half Australia

Trading Behaviour Report

Survey Highlights

2016 First Half Australia Trading Behaviour Survey

© 2016 Investment Trends 2

Thank you

Thank you again for taking part in our 2016 First Half Australia Trading

Behaviour Survey.

Your responses, together with those of other investors, provide a valuable

insight into the current state of the Australian investment landscape. The

resulting research will help stockbrokers and other providers create products

and services better suited to your needs.

The 2016 First Half Australia Trading Behaviour Report provides a detailed

portrait of Australia’s sophisticated population of active share investors and

CFD traders. Many key findings are highlighted in this extract, including some

fascinating insights into the behaviour of your fellow investors.

I hope you find it interesting.

Yours sincerely,

Mark Johnston

Principal

Investment Trends

Suite 2102, Goldfields House

1 Alfred Street

SYDNEY NSW 2000

Australia

Survey Highlights



Table of contents

About Investment Trends 4

Methodology and scope 5

Investor concern levels 6

Capital gains expectations 7

Long-term outlook 8

Top concerns 9

Number of broking accounts 10

Account opening process 11

Adviser usage 12

Products new to market 13

ASX BookBuild and mFunds 14

Smartphones/tablets 15

Catalysts for CFD trading 16

Underlying instruments 17

Investment decisions 18

Education needs 19

Survey Highlights



About Investment Trends

Investment Trends is a specialist research organisation which provides new

business insights and decision support information to many leading financial

services organisations. We combine analytical rigour and strategic thinking

with the most advanced market research and statistical techniques to help our

clients gain competitive advantage.

Investment Trends is headed by Mark Johnston. Mark has been a leading

industry analyst in the brokerage, CFD, FX and wealth management industry

since 1999.

Investment Trends was started in Australia and is now a multi-national

research organisation servicing clients in Australia, Asia, Europe and the US.

Our work is focused on helping clients answer three fundamental questions:

1. How does the market currently work?

2. How is the market evolving?

3. How do I improve business outcomes:

• Acquire more customers

• Retain more existing customers

• Increase revenue per customer

• Prioritise technology and process investments

Investment Trends’ clients include many of the leading banks, investment

platform providers, online brokers, FX and CFD providers, as well as major

industry regulators.

Survey Highlights



Methodology and scope

The 2016 First Half Australia Trading Behaviour Survey examines the trading

behaviour of Australian online investors and traders. The report is based on a

detailed online survey of Australian online investors concluded in May 2016.

A total of 15,052 valid responses to the survey were received after data

cleaning and de-duplication.

Survey Highlights



Investor concern levels

Investor concern levels drop to lowest

since September 2014

Australian investors are significantly less concerned than six months ago. On a

scale of 0 to 10, share investors' concern about the world’s financial markets

measured at 5.7 in May 2016 (down from 6.3 in November 2015, and one of

the lowest since the 2011 market correction).

This positive evolution is in line with the rebound of the Australian equity

market in early Q2 2016.


5.7

6.2

7.4

6.3

6.9

6.5

6.9

7.3 7.4

7.1

6.7

6.4

6.8

6.5

6.6

5.9

6.3

6.2

6.46.3

5.8

6.0

5.6

5.8

5.4

5.7

6.1

5.9

6.2

6.0

6.2

6.1

6.3

6.1

6.0

6.4

6.5

6.1

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

Aug-11

Nov-11

Feb-12

May-12

Aug-12

Nov-12

Feb-13

May-13

Aug-13

Nov-13

Feb-14

May-14

Aug-14

Nov-14

Feb-15

May-15

Aug-15

Nov-15

Feb-16

May-16

Average concern level

(10=Extremely concerned, 0=Not concerned at all)

3,000

3,400

3,800

4,200

4,600

5,000

5,400

5,800

6,200

6,600

All Ordinaries Index

All Ordinaries Index (RHS) Average concern level (out of 10, LHS)

Concern level with the situation in the financial markets vs All Ordinaries Index

Among Australian investors

Source: Investment Trends May 2016 Investor Intentions Index Report

Question wording:

What is your expectation for the Australian stock market over the next 12

months (excluding dividends)?

In May 2016, concern levels reached the lowest level this year as the ALL ORDS index

rallied strongly

Survey Highlights



Capital gains expectations

Outlook for domestic equities improves substantially

Consistent with investors' concerns abating, average return expectations

(excluding dividends) for domestic stocks have recovered since reaching a

historic low of 1% (monthly) in January this year. As of May 2016, Australian

share investors expect a 4% annual return from the All ORDS over the next 12

months.


13%

7%

4%5%

4%5%

7%

4%

6%

4% 4%

6%

3%

3%

3%

2%

5%5%

2%1%

2%3%

5%

8%8%

6%

5%

3%

4%

2%3%

0%

2%

4%

6%

8%

10%

12%

14%

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Average return expectation

(next 12 m

onths, excl. dividends)

3,000

3,400

3,800

4,200

4,600

5,000

5,400

5,800

6,200

6,600


All Ordinaries Index (weekly close) Average return expectation for next 12 months (excluding dividends)

Australian stock market expectations for the next 12 months vs All Ordinaries Index


Australian investor expectations plunged to 1% in January 2016 before recovering in

May. With the recent RBA rate cut, current low capital gains expectations are

nevertheless twice as high as the cash rate


Question wording:

What is your expectation for the Australian stock market over the next 12

months (excluding dividends)?

Survey Highlights



Long-term outlook

Five year expectations continue to trend downwards

Average five year expectations (excluding dividends) continue on a

downward slope. Australian share investors expect a 15% total return on

equities over the next five years, significantly lower than 20% two years

ago.

The period between February and May 2016 is of particular interest as

investors’ long-tern outlook continued to deteriorate, even though short-

term expectations rose off the back of the ALL ORDS rally.


Five year expectations remain relatively high, although they have trended downwards

over recent years

4%

21%

19%

20%

3%

2%

3%

2%

4%

3%4%

4%

6%

5%

6%

5%

6%

5%6%

7%

6%

5%5%

6%

8%7%

5%4%

3%

4%3%

4%5%

3%2%

3%4%

4%

7%8%

13%

6%

4%

4%

3%

4%

1%2%

3%3%

2%

4%

16%

15%

17%

18%

16%

17%

16%

17%

14%

19%19%

15%

17%

24%

21%

23%

20%

18%

20%

24%

19%

22%21%

24%

20%

21%

20%18%

21%

0%

4%

8%

12%

16%

20%

24%

28%

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Average return expectation

(next 12 m

onths, excl. dividends)

3,800

4,200

4,600

5,000

5,400

5,800

6,200

6,600


All Ordinaries Index (weekly close)Average return expectation for next 12 months (excluding dividends)Average return expectation for next 5 years (excluding dividends)

Australian stock market expectations for the next 12 months & next 5 years vs All Ordinaries Index


Survey Highlights



Top concerns

China and another GFC are the top worries

Nearly one in two Australian investors point to China slowdown (49%) or

another global financial crisis (48%) as their top concern in relation to their

investments.

Whilst China remains a big worry for investors, this has significantly wound

down after the rout of the Chinese stock market in Q3 2015, when the causal

link between the state of the Chinese economy and the performance of global

financial markets was highlighted.


Concerns about China have subsided somewhat, although this remains the top worry

for share investors

49%

48%

42%

32%

25%

23%

Average no. of

concerns: 4.1

0%

10%

20%

30%

40%

50%

60%

70%

80%

Aug-14 [n=646]

Sep-14 [n=607]

Oct-14 [n=502]

Nov-14 [n=790]

Dec-14 [n=629]

Jan-15 [n=557]

Feb-15 [n=603]

Mar-15 [n=592]

Apr-15 [n=789]

May-15 [n=641]

Jun-15 [n=506]

Jul-15 [n=707]

Aug-15 [n=557]

Sep-15 [n=597]

Oct-15 [n=570]

Nov-15 [n=490]

Dec-15 [n=562]

Jan-16 [n=510]

Feb-16 [n=252]

Mar-16 [n=199]

Apr-16 [n=213]

May-16 [n=246]

0

1

2

3

4

5

6China slowdown

Another global financialcrisis/market crash

Australian economy

Australian debt level

Global debt levels

Share market volatility

Property prices

Exchange rates/value ofAUD

Average no. of concerns(RHS)

What are you most concerned about in relation to your investments? (Multiple responses permitted)

Top eight concerns among Australian share investors


Survey Highlights



Number of broking accounts

Australian online investors hold fewer broking accounts

Australian online investors hold 1.3 online broking accounts, on average. This

places Australia second last – just above Germany – by average number of

accounts held by online investors.

Hong Kong ranks first with more than half of online investors on the island

holding two or more broking accounts.


Proportion of current online investors by number of online broking accounts

10%5% 4%

9%

13%

10% 10%

13%

7% 6%4% 3%

29%

28% 30%

26%

24%20%

20%15%

58% 57%53%

67%73% 75%

81%

47%

2.0

1.6 1.6 1.6

1.51.4

1.31.3

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Hong Kong

(Jan '16)

Spain

(Feb '16)

France

(Apr 2016)

UK

(Jul '15)

Singapore

(Aug '15)

US

(Jun '15)

Australia

(May '16)

Germany

(Apr '15)

0.0

0.5

1.0

1.5

2.0

2.5One

Two

Three

Four or more

Average numberof accounts held(RHS)

Australian online investors tend to hold fewer broking accounts than their peers in

seven other markets covered by Investment Trends

Survey Highlights



Account opening process

ID documentation tops the list

of barriers to account opening

More than two in five (43%) online investors who give up opening a trading

account do so because they are required to provide too many ID documents.

Not being able to complete the ID check online (31%) and difficulty of linking to

cash account (30%) are the other common non-personal barriers.


Q122 What did you find difficult about the account opening process?

(Multiple responses permitted) Among those who didn't open an account

because the process was too difficult [n=99]

43%

37%

31%

30%

25%

24%

22%

14%

16%

0% 10% 20% 30% 40% 50%

They asked for too many identification documents

I decided I no longer wanted to use that broker

I could not complete my ID check online

It was hard to link with my existing cash account

The application form was too long

I didn't want to open a new cash account

Sought customer service assistance but didn't receive any

I couldn't find the application form

Other

The number of documents needed for ID verification is the most common difficulty

encountered during the process of opening an account

Survey Highlights



Adviser usage

Very few share investors seek professional advice

60% of current online investors did not receive any sort of advice before

making their most recent online investment. Just over 18% used a professional

adviser, while many rely on internet forums, relatives and friends.


International share investors are more likely to seek advice from a professional adviser

Q82 Did you receive advice before making your most recent investment in your main

product? (Multiple responses permitted) By main product.

Among current online investors

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes, from a different

professional adviser

Yes, from via an internet forum

Yes, from a friend/family

member

Yes, from a full-service

(advisory) broker

Yes, from a colleague

Yes, from a bank representative

Other

No, I did not receive advice

before making this investment

All current online investors [n=8241]

International shares [n=362]

Exchange traded funds (ETFs) [n=360]

18%

Survey Highlights



Products new-to-market

Online investors tend to be early adopters

More than one in two (56%) of online investors identify themselves as being

early adopters of products and services new-to-market, i.e. among the first to

try them.

Another 29% of current online investors tend to wait for others to try a new

product or service before they do.


Most online investors say they are early adopters of products new-to-market

Q3 Which of the following statements best describes you, with regards to purchasing

products and services (in general) that are new to market?

Among current online investors [n=8,487]

I'm usually the

first to try new

products & services,

21%

I'm usually one of

the first to try new

products & services,

35%

I wait till others've

tried a new product

before trying, 29%

I wait till most others

have tried a new

product before trying,

7%

I'm usually the last

among friends to try

a new product, 8%

56%

Survey Highlights



ASX BookBuild and mFunds

Low current usage, but healthy demand for ASX BookBuild

and mFunds

Awareness of ASX BookBuild and mFunds is low. Nearly half of online investors

have never heard of mFunds, while about two in five have never heard of ASX

BookBuild for IPOs.

As a result, current usage of either product remains very low (in single-digit

percentages). However, about one in five of the investors have never heard of

the products but are interested in learning more, signalling healthy demand.


Usage of ASX BookBuild or mFunds is still very low, but there is healthy demand

7%

22%

20%

28%

27%

42%48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ASX BookBuild for IPOs mFunds

Never heard of it

No, and I'm notinterested

No, but I'd like to learnmore

Yes, but I don't intend touse it again

Yes, and I plan tocontinue doing so

Q96 Have you used any the following products? (Multiple responses permitted)

Among current online investors [n=7564]

Survey Highlights



Smartphones/tablets

Australia ranks middle of the pack on adoption

59% of Australian online investors use a smartphone or tablet in relation to

their online investing, placing Australia middle of the pack on adoption

compared to seven other key markets.

Penetration of mobiles is highest in Hong Kong (86%) and Singapore (84%), and

lowest in Germany (48%) and France (48%).

Penetration is higher among traders of leveraged instruments, with about 81%

of Australian traders using mobile devices in the context of trading.


Proportion of traders who use their smartphone/tablet in the context of trading:

International comparison

90% 90% 87% 83% 81% 79% 78% 76% 74% 73% 69% 69%

86% 84%74%

62% 59% 56%48% 48%

4% 7%5%

8%5% 8% 10%

7% 7% 7% 13% 9%

8%6%

12%

8%7% 10%

15% 11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sing. CFD (Aug

2015)

HK lev. products

(Jan 2016)

Sing. FX (Aug

2015)

Spain CFD/FX

(Feb 2016)

Aus. CFD (May

2016)

UK CFD (Jul

2015)

Aus. FX (Nov

2015)

UK spread

betting

(Jul 2015)

UK FX (Jul

2015)

US FX (Jun

2015)

Ger. CFD/FX

(April 2015)

France CFD/FX

(Apr 2015)

Hong Kong

(Jan 2016)

Singapore

(Aug 2015)

Spain

(Feb 2016)

US

(Jun 2015)

Australia

(May 2016)

UK

(Jul 2015)

Germ

any

(Apr 2015)

France

(Apr 2016)

Leveraged product traders Online stockbroking investors

Currently use a mobile device for trading Intend to start using a mobile device for trading within 12 months

Adoption of mobiles among Australian investors ranks middle of the pack among eight

countries covered

Survey Highlights



Catalysts for CFD trading

Increased volatility prompted many to start CFD trading

Increased volatility on global equity markets often creates an environment

conducive to leverage trading. With volatility picking up over the past twelve

months, nearly a third (32%) of those who placed their first ever CFD trade

(new traders) point to increased volatility as the trigger to start using the

product.

Among all active traders, increased volatility, seminars, a course of study in a

related area and word of mouth tend to be the most common triggers.


Q11 What first prompted you to start trading CFDs? (Multiple responses permitted)

Among current CFD traders

32%

17%

19%

20%

9%

12%

7%

7%

11%

5%

6%

6%

7%

8%

6%

0% 10% 20% 30% 40% 50%

Increased volatility on financial markets

I attended a seminar/training course

I found out about this product during my studies

Recommendation from a friend or family member

I searched for a different product online, this one came up

I found out about it on an online forum/blog

I work in this field (e.g. finance, trading)

I read about it in a report/newspaper article

Recommendation from my CFD provider

I attended a trading expo

I saw an advertisement on a financial website

Recommendation from my online broker

Recommendation from my financial adviser

Saw an advertisement outside (e.g. bus, billboard, etc)

Other

I don't remember

All current CFD traders [n=1311]

New CFD traders [n=313]

New CFD traders most commonly cite increased market volatility as reason to begin

CFD trading in the last 12 months

Survey Highlights



Underlying instruments

CFD traders are moving towards indices

and away from shares

Though FX remains the prime asset class CFD traders trade on, Australian

indices gained significant ground in the past year, with 45% of current CFD

traders using them, up from 42% in 2015.

CFD trades on blue chip Australian shares moved to third place, with only 42%

of CFD traders using them, vs 47% in 2015.


Q38 [Which of the following instruments did you place CFD trades in last 12 months?]

(Multiple responses permitted) Among current CFD traders

50%

45%

42%

39%

36%

36%

22%

4%

0% 10% 20% 30% 40% 50% 60% 70%

FX

Australian indices

Blue chip Australian shares

Overseas indices

Commodities

Other Australian shares

Overseas shares

Other2015 [n=1453]

2016 [n=1119]

Compared to last year, CFD traders are much less likely to trade CFD on shares and

turning to Australian indices

Survey Highlights



Investment decisions

Technical analysis remains the most used

decision aid tool

Technical analysis remains the preferred tool in making investment decisions,

with 64% of current CFD traders using it, steady from 2015.

Fundamental analysis comes a distant second at 35%, while the proportion of

traders using business/economic news to inform their trading decisions was

trimmed significantly to only 27%, down from 37% in 2015.

I-15Copyright 2016 Investment Trends Pty Ltd. 2016 First Half Australia Online Broking Report: Industry Trends. Confidential. internal use only. Reproduction prohibited.

Q36 How do you decide on what CFD trades to make? (Multiple responses permitted)

Among current CFD traders

64%

35%

27%

25%

23%

11%

7%

6%

5%

6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Technical analysis (charts)

Fundamental analysis

Business/economic news

Analyst recommendations

Use my instinct/gut feeling

Tips from investment newsletters

Follow other traders on social trading sites

Recommendations from my main CFD provider

Tips from internet forums

Recommendations from other CFD providers

Other2015 [n=1526]

2016 [n=1142]

CFD traders remain reliant on technical and fundamental analysis for their investment

decisions. They are less likely to use business/economic news compared to a year ago

Survey Highlights



Education needs

Traders want information on strategies, charting tools and

common trading mistakes

Only 16% of current CFD traders think they have no education needs.

Trading strategies (37%), technical analysis (34%) and common CFD trading

mistakes (30%) are the most common topics of which CFD traders would like

more education.

Next most important topics are risk management (24%), fundamental analysis

(23%) and commodity markets (22%).

I-16Copyright 2016 Investment Trends Pty Ltd. 2016 First Half Australia Online Broking Report: Industry Trends. Confidential. internal use only. Reproduction prohibited.

Q66 What types of education/information would be very useful to you regarding CFD

trading? (Multiple responses permitted) Among current CFD traders [n=1,072]

37%34%

30%24%23%

22%21%

20%15%14%14%

13%11%11%11%11%10%9%9%9%8%

6%

16%

0% 10% 20% 30% 40% 50%

CFD trading strategiesTechnical analysis/charting

Common CFD trading mistakesRisk management

Fundamental analysisCommodity marketsAutomated trading

Market research/insightHow fees and charges workPlacing conditional orders

Trading platform user guideHow to use my broker's trading platform and tools

How CFD trading is regulatedWhat drives currency rate movements

Comparison of different investment productsUnderstanding when my provider'd close a position

Understanding gapping and slippageBasic introductory information

Comparison of different marketsHow leverage works

How to networking with other tradersInformation on regulatory changes

How to trade certain underlying productsHow fees and charges work

OtherNothing

Current CFD traders would like information on trading strategies, technical

analysis/charting and common CFD trading mistakes

Survey Highlights



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SYDNEY NSW 2000

Australia

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Fax: +61 (0) 2 8248 8088

E: [email protected]

www.investmenttrends.com.au

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Trading Behaviour Survey”) contains proprietary information including

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Documents

2016 First Half Australia Trading Behaviour Report ... · Average return expectation (next 12 months, excl. dividends) 3,000 3,400 3,800 4,200 4,600 5,000 5,400 5,800 6,200 6,600