The Impact of “Brexit” on Retail Investors; Monex survey 

Twenty-first Monex Global Retail Investor Survey

Survey Focusing on the Impact of “Brexit” on Retail Investors

Monex, Inc. has published “The Twenty-first Monex Global Retail Survey(*)” that was conducted from May 25 to June 6, 2016.

Below is a Summary of the findings as it was published:

The results of this month’s Global Survey were characterized by improvement in retail investors’ outlook for stock markets compared to the previous survey (conducted between February and March 2016), with the retail investors’ world stock markets forecast DI(**) rising 10 points or more from the previous survey in all three regions. Seeing global stock markets hit bottom and rebound appears to have improved sentiment among retail investors.

In this month’s survey, we also prepared a special question on the impact on retail investors sentiment of the outcome of the UK referendum on whether to leave the EU, so called “Brexit”. The percentage of retail investors expecting the UK to remain in the EU was high, at somewhere around 70% or 80% in all three regions. The results of the survey showed that the outcome of the referendum is likely to have a significant impact on retail investor sentiment, with somewhere around 30% or 40% of retail investors in  each region answering that they would be more bearish if the UK voted to leave the EU and with this being the most popular answer among retail investors in China (Hong Kong), in particular.

Summary Findings

1. Global Survey Results: Survey of Retail Investors in Japan, the U.S. and China (H.K.)

(1-1) The forecast DI of retail investors in all three regions improved

We asked retail investors in each region about their views on world stock markets for the coming three months. The forecast DI rose 10 points or more from the previous survey in all three regions, and the forecast DI became positive among investors in China (Hong Kong). Retail investors’ sentiment appears to have improved due to gains in world stock markets.

[Forecast DI: Japan] Mar. 2016:-19 June 2016: -6(+13points)

[Forecast DI: U.S.] Mar. 2016:-18 June 2016: -1 (+17 points)

[Forecast DI: China (H.K.)] Mar. 2016: -23 June 2016: 4(+27points)

(1-2) Expectations for U.S. stocks reached a record high among retail investors in Japan

As in the previous survey, the percentage of retail investors who answered that the U.S. was the region where there is the greatest likelihood of stock price appreciation in the coming three months was the highest in all regions. In particular, the percentage of retail investors in Japan that have the highest expectations for the U.S. reached 57.7%, which is the highest level since the survey began. Expectations for the U.S., whose economy seems relatively strong, remained high.

[Japan] U.S.: 57.7% Europe/U.K.: 8.2% Asia excl. Japan: 12.7% Japan: 21.4%

[U.S.] U.S.: 69.1% Europe/U.K.: 14.0% Asia excl. Japan: 11.0% Japan: 5.9%

[China (H.K.)] U.S.: 59.1% Europe/U.K.: 8.1% Asia excl. Japan: 27.5% Japan: 5.3%

(1-3) Energy was ranked the third most attractive sector in both the U.S. and China(H.K.)

Energy ranked the third on the list of the most attractive sectors in both the U.S. and China (Hong Kong).

In February 2016, the WTI crude oil futures price temporarily fell to around $25 a barrel, but has recently recovered to around $50. With pessimism surrounding crude oil prices subsiding, expectations that energy stocks will rebound after plummeting in response to falling crude oil prices appear to be mounting. Meanwhile, there was no movement in the top six sectors that Japanese retail investors consider most attractive, from Medical in first place to Retail in sixth.

(1-4) The percentage of retail investors forecasting a further rate hike in the U.S. between July and September 2016 was the highest in all three regions

The percentage of respondents who answered that the timing of the FRB’s next rate hike would be between July and September 2016 was the highest in all three regions. However, whereas the next most popular answer among retail investors in Japan and China (Hong Kong) was between October and December 2016, the next most popular answer among investors in the U.S. was June 2016. This indicates that there tends to be a slight difference among regions in the anticipated timing of the next rate increase.

(1-5) The percentage of retail investors anticipating that the remain camp will prevail in the UK’s EU referendum was the highest in all three regions

We asked retail investors about the EU referendum to be held in the UK on June 23 (Brexit). The percentage answering that they expect pro-Europeans to prevail in the referendum was the highest in all three regions. Opinion polls conducted in the UK indicate a close competition between pro-Europeans and pro-Brexit. However, it appears that many retail investors expect the UK electorate to support remaining in the EU in the end.

(1-6) If Britain voted to leave the EU, this would have an adverse impact on retail investor sentiment

We asked retail investors what impact a vote to remain in the EU and a vote to leave the EU would have on their investment willingness and the world economy, respectively. The results showed that the outcome of the referendum is likely to have a significant impact on retail investors sentiment, with the percentage answering that a vote to leave the EU would make them more bearish ranging somewhere between 30% and 40% in all regions and with this being the most common answer in China (Hong Kong) in particular. Moreover, 30% and more of retail investors in all three regions answered that they thought the world economy would deteriorate in the event of a vote to leave the EU.

2. Japan Bimonthly Survey Results: Survey of Retail investors in Japan

(2-1) The DIs for Japanese stocks, U.S. stocks and Chinese stocks all rose, and the DI for Japanese stocks turned positive

We asked Japanese retail investors about their outlook for the stock markets in Japan, the U.S. and China in the coming three months. The DIs for Japanese stocks, U.S. stocks and Chinese stocks all rose from the previous survey (conducted in April 2016). The DI for Japanese stocks turned positive, and the DI for U.S. stocks reached 49, the highest in the 15 months since March 2015.

[Japanese Stocks DI] Apr. 2016: -7  June 2016: 4(+11 points)

[U.S. Stocks DI] Apr. 2016: 47 June 2016: 49(+2 points)

[China stocks DI] Apr. 2016: -48  June 2016: – 43(+5 points)

(2-2) The majority of Japanese retail investors expect the BOJ to take additional monetary easing measures in the first half of the fiscal year

The majority of Japanese retail investors expect that the Bank of Japan will take additional monetary easing measures in June 2016 or between July and September 2016. Meanwhile, more than 30% answered that there would be none for the time being, indicating that opinion is divided among retail investors. When we asked those who answered that additional monetary easing measures would be taken in June 2016 to forecast the content of the additional easing measures, most answered an increase in purchase by the Bank of Japan of ETF and J-REIT.

 

* An outline of the surveys conducted in Japan, the U.S. and China (H.K.)

** DI (diffusion index): The percentage of respondents who answered “will rise or improve” minus the percentage of respondents who answered “will fall or deteriorate ”

Monex, Inc. has been surveying retail investors about their attitudes to financial market conditions, providing you with the survey results as the “Monex Retail Investor Survey” since October 2009. In addition to Japan, as our group has established securities businesses in the U.S. and China (Hong Kong), we expanded this retail investor survey geographically and added the U.S. and China (Hong Kong) in order to compile the “Monex Global Retail Investor Survey” since June 2011. Monex, Inc., TradeStation Securities, Inc. and Monex Boom Securities (H.K.) Limited have been jointly conducting this survey and observing retail investors’ attitudes about financial market conditions in Japan, the U.S. and in China (Hong Kong) on a regular basis.

Read the details of the results of the survey here

Source: Monex

 

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