US rally boosts Sharesies retail sentiment defying usual Christmas jitters

Investor sentiment in September to December or the Q3 financial year, went from cautious to concerned and back again. This contrasts with previous two years when Sharesies saw steep drop offs in confidence during November and December as investors felt less well-off and faced holiday season demands.

Sharesies joint CEO Brooke Roberts says the rising cost of living hasn’t impacted Sharesies investment. “The majority of investors on the platform are investing over time, so we’re seeing dollar cost averaging and habitual investing behaviour.

“I think there's a lot more awareness now in terms of the benefits of investing and that you can invest amounts that you can afford, it doesn't have to be a big lump sum of money.”

Trading volumes and the net buy/sell ratio provided the proof in the Christmas pudding that sentiment remained steady. December trading volumes were the highest in Sharesies’ six year history, probably due to the US market rallying after the Federal Reserve signalled interest rate cuts for 2024.

Buying dominated over the quarter with the net buy/sell ratio averaging 1.39, up from 1.15 and 1.07 in the previous two quarters. US markets had a major impact, as about 70% of Sharesies trades and 31% of portfolio holdings were in the US.

Sell trades increased, particularly in US big tech companies like NVIDIA, Apple, big data software company Palantir Technologies and Meta, as some investors opted to take profits following the market’s rebound. 

Companies v funds

The percentage invested in companies (PIC) versus investment funds (managed and ETF) stayed within the 70-80% range and overall trended upwards for the quarter.

Sharesies says while activity didn’t reach the high 80s, often associated with a bullish market, traction was solid. The quarter ended with tradies favouring companies over funds, with 78% of all trades in individual companies.

Sharesies says a higher PIC might show higher confidence, with investors prepared to take a risk on their company picks, whereas when confidence is lower, they tend to seek more diversification using funds.

Deposits

The net deposit ratio, which measures the flow of funds in and out of Sharesies investment and savings products, climbed a notch due to investor deposits outweighing a slight expected uptick in withdrawals in the lead-up to Christmas.

For every $1 withdrawn, $2.08  was deposited and remained stable throughout the quarter. Historically, a higher net deposit ratio has indicated higher levels of investor confidence,  says Sharesies says this shows investors are staying to their saving goals, despite the financial pressures of the holiday season. This was driven by an increase in deposits towards investing but also the launch of the Sharesies Save product.

Sharesies bundle

Of the 50 most owned instruments on the platform, Air New Zealand, Tesla, Apple, Auckland International Airport and Mainfreight came out top for companies while Smartshares US 500 Fund ETF, Pathfinder Global Responsibility Fund, Smartshares NZ Top 50 Fund ETF, Vanguard 500 Index Fund ETF, and the Pathfinder Global Water Fund.

Tourism Holdings climbed 12 places to rank 46th in the Sharesies Bundle after the company returned to profitability and resumed dividend payments. Vanguard Australian Shares Index ETF was up seven places to 44, and was particularly popular among investors on the Sharesies Australia platform. Australia is home to 11% of Sharesies members.

Fonterra climbed six places to 31 following its dividend payout announced in September, which could be a signal of greater optimism towards it after the change of government, says Sharesies.

On the downward trend, Smartpay fell five places to 50. Sharesies says the company delivered strong earnings growth in 2023 and some investors, who bought at an average price of $0.85, took the opportunity to sell at closing prices ranging between $1.26 and $1.65. Meta, which had a 194.1% return for 2023, was a net-sell during the quarter and dropped three places to 39  in the rankings. Three steps backwards was also the fate of Contact Energy falling to 35, Ryman Healthcare to 21 and SPDR S&P 500 ETF Trust to 28.

KiwiSaver

Sharesies KiwiSaver, which now has more than 4000 members and $100 million in assets under management, wasn’t included in the quarterly data. Roberts says Sharesies is considering bringing it into the mix for the next quarter and adds that about one third of members are taking up the self-select option which lets them pick and mix funds and stocks in their KiwiSaver portfolio.