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While the level of share ownership has declined slightly in the past two years, the vast majority of shareholders have not only remained in the market but also have increased their level of activity and involvement.
According to the latest Share Ownership Survey, carried out in November 2002, Australian shareholders remained steadfast as the long bull market drew to a close and the market overall recorded its first annual downturn in eight years.
The survey found that since the previous update survey conducted in November 2000, total share ownership had declined by just two percent - driven by the three percent decrease in the ranks of those directly owning shares (in their own name, as opposed to through a managed fund or DIY super).
As at November 2002, an estimated 50% of Australian adults (7.3 million people) owned shares in their own name or through a managed fund. An estimated 37% (5.4 million) owned a direct shareholding.
The survey found that compared with the previous survey, the "average shareholder" still owns shares, but is more likely to be male, to own more shares, to have a portfolio of higher value and to trade more often.
Australian Stock Exchange chief executive officer and managing director Richard Humphry welcomed the survey's findings.
"I believe the 2002 survey demonstrates the Australian investing public's coming of age following several years of a boom market, with its large-scale demutualisations and privatisations. The level of involvement by Australians in their market remains extremely high and their increasing participation - demonstrated by greater diversification and trading activity - is both gratifying and testament to the underlying strength and integrity of the Australian sharemarket," he said.
"Of course, the sustained levels of participation also reflect the fact that in currency-adjusted terms the Australian market has outperformed all major markets worldwide in the past two years. While no directly comparable study with offshore markets is available, I would be most surprised if Australia's level of shareownership were to have lost any ground in terms of international relativities."
"It is important to note that these findings do not take account of the massive investment made from the $500 billion-plus gathered through compulsory superannuation. When you add that to the stakes held through direct and indirectly-managed portfolios, the true significance and value of the Australian sharemarket is clear," Mr Humphry said.
The survey was conducted on behalf of ASX by independent research firm Millward Brown Australia, who interviewed a weighted sample of 2,400 Australians in November and December 2002. This was the seventh such survey carried out by ASX since 1991, and was funded through the Financial Industry Development Account of the ASX National Guarantee Fund.
While overall ownership numbers changed only slightly, there has been a considerable shift in the composition of those totals. One significant change has been an apparent widening of the "gender gap" in share ownership, after several years in which the gap closed. The survey found that 33% of women own shares in their own name, down from 36% in previous surveys. This compares to 41% of men who directly own shares.
Also of significance was the decline in the number of shareholders in the age groups between 25 and 54, probably reflecting the residential investment property boom. This was somewhat offset by a substantial increase in the number of investors in the 55-plus bracket and a smaller increase in the 18-24 group. As with previous surveys, the 2002 study suggests a relationship between the levels of direct share ownership and the level of education and household income earned.
From a geographic perspective, the survey found considerable variation in the levels of direct share ownership. In New South Wales the level declined from the previous national high (48 to 40%), probably reflecting the previous survey's timing immediately following the NRMA float. In other states the levels remained either steady or, in the case of Victoria and South Australia in particular, increased significantly.
The 2002 survey has highlighted a number of positives in terms of shareholder behaviour. Chief among these is the range of companies held in the typical portfolio, and the value of investments in the market. While the mean-average has remained steady at six companies per portfolio, the survey found that considerably fewer investors held shares in just three or less companies.
The level of trading has also increased significantly with investors now completing on average 3 trades per annum. The proportion of investors not trading at all over this period has also fallen considerably.
3 Continuing this overall trend, there has been a decline in trading activity at the lower end of the market, especially for trades worth less than $5,000, and an increase at the higher end, particularly the $10,001 to $25,000 bracket. The average value of each sharemarket transaction has increased from $5,700 in 1999 to $8,800 in 2002.
One in two shareholders use just one broker, and increasingly that relationship will take place on the Internet. In many cases the broker will provide transaction execution only, with the main source of investment advice being financial planners and newspapers, followed closely by family and friends. But only two in five investors consider a professional adviser to be their main source of advice.
The 2002 survey also captured shareholders' attitudes toward their investments, and found owners still believed they needed to take responsibility for their own financial future, and that shares form an essential part of a balanced investment portfolio.
However, market conditions have undoubtedly affected immediate behaviour. Investors felt time-poor and less enthusiastic about being involved. However, more were considering investing in blue chip shares. These are all characteristics of a bear market.
Among the 63% of the adult population who are not directly involved in the sharemarket, the 2002 survey estimated that two in five were "potential share holders". These people were characterised by their attitude that they have often thought about buying shares and now is a good time to do so. This group represents 23% of the population - more than 3 million people. More than a third of this group, or 8% of the adult population, have owned shares in the past. Indeed, the survey found that 5% of the population (representing 700,000 people) believed they would buy a share portfolio within 12 months.
While the survey revealed a growing maturity and level of understanding of the market, this was not always evident. For example, three in four direct investors either did not know if they paid stamp duty on share transactions, or believed that they still did. This belief was held across all types of shareholders, including the more confident and experienced share owners. The Federal Government abolished stamp duty on share transactions in July 2001.
To view the Share Ownership Survey 2002, click here.
