CommSec’s latest SMSF Trading Trends Report paints a picture of an SMSF cohort shifting their focus beyond the ASX20 and towards global economic trends.
These trends include Chinese demand for Australian milk products, as well as a growing need for lithium by battery manufacturers and an improvement in oil prices.
To the head of SMSF customers at Commonwealth Bank, Marcus Evans, these focuses show the strength of SMSFs’ investment decisions.
“SMSFs are leaders in investment trends and are a good barometer on where the next wave of investments from the broader market will go,” he said.
CommSec observed that both a2 Milk and Bubs Australia – both Chinese-facing milk stocks – are stocks that have seen strong increases, while small resource stocks, led by lithium miners Galaxy Resources and Pilbara Minerals and rare earths miner Lynas Corporation, are also growing in popularity.
“Lower returns from traditional SMSF favoured stocks with household names such as Telstra, have led to SMSFs investing more capital outside the ASX20, suggesting they are willing to take on more risk to get higher returns,” Mr Evans noted.
At the same time, however, SMSFs appetite for ETFs could be waning. In the six months to 31 December 2017, SMSFs overall holdings of ETFs rose but the value of ETFs traded fell by 6 per cent.
CommSec added that this fall has been concentrated primarily in domestic equity funds, while international funds have continued to increase but at a slower pace than before.
The report also suggested that, thanks to gains from mid-cap and junior stocks as well as continued performance of many international markets like the US, Europe and emerging markets, SMSF investors have concluded that there could be better opportunities outside of the ASX20.
“There are signs that SMSFs have made the move outside of the ASX20 with some conviction. This is illustrated by the fact that while the average SMSF trade size has decreased over the period, the trade size of those stocks outside the ASX200 has in fact increased,” Mr Evans said.
Looking more broadly, CommSec claimed the big issues for 2018 will be Donald Trump’s presidency, the matter of how long inflation will remain low, a disconnect between wage growth and jobs, a softening property market, infrastructure, the impact of lower taxes, consumer debt and a slowing Chinese economy.
“We will continue to watch the investment habits of SMSFs closely. To date they have been setting the trends when it comes to retail investment,” Mr Evans said.