Jamie Gray
Price gyrations don’t deter users of online investment platforms
Rise of the small investor
Covid-19 lockdowns and extreme volatility on world markets have not dampened retail investors’ appetite for shares, if the rising popularity of online trading platforms is anything to go by.
Local platform Sharesies — which is 15 per cent owned by Trade Me — started off with 10 per cent month-on-month growth for the first two-anda-half years of operation.
Co-founder and head of operations Leighton Roberts said a reasonable goal seemed to be about 60,000 users.
“That was quite some time ago, obviously, but we’re sitting here today with closer to 160,000 and so clearly the appetite was really there,” he said.
That was against the background of a more difficult economic environment but also a “democratisation” of the investing process, which has allowed people to become involved using much smaller amounts, and at low cost.
Roberts said the growth of the “fintech” companies like Sharesies had presented opportunities.
During the last two or three months, growth had been more like 20-25 per cent.
“What that told us is that even if people weren’t customers of Sharesies already, certainly the reach was there and people were thinking about it,” he said.
“What [lockdown] gave is that people at home finally got around to signing up,” said Roberts.
“We always knew our brand reach was bigger than our customer base.”
High-profile companies facing difficulties, such as Air New Zealand and Auckland Airport, have only whetted investor appetite, particularly for new capital raisings.
“And that’s interesting, the impact that can have on the capital market landscape,” said Roberts.
“For us, we saw direct correlation with that news — and to be honest, most of it reasonably bad news — but still encouraging people into at least looking.”
Hardened investors might be wary of the stock market right now, but Roberts said platform users were typically in it for the long haul, with most using dollar-cost averaging.
“The average deposit into the platform is still around $50 per week. The vast majority are using dollar-cost averaging strategy and investing every week on it.
“Even the most sophisticated of investors would say that that’s very good strategy for a retail investor and not to stop when markets are bumpy.”
Roberts said there were stark contrasts between today’s volatility and the 1987 sharemarket crash, which prompted many retail investors to desert the market for a decade.
“I would say at the moment we are seeing the exact opposite. We have not seen a lot of selling and investors on the platform class themselves as long term investors.”
It’s been a similar story in other markets, particularly in the United States, where share trading platforms are showing strong growth.
Is it possible that the socalled “pocket portfolio” investment platforms are having an influence on the market?
“Loosely, I would say not,” Roberts said.
“Sharesies was responsible for 3 per cent of NZX turnover last month so it’s not a significant influence.
“But it is showing that there is a level of optimism to come out of this, which is supportive for the economy.”
Lockdown opportunity
It’s been a similar story at the Jarden-owned Direct Broking.
“Our Direct Broking retail clients have been buying shares roughly twice as much as they have been selling shares in the last few weeks, versus the same period last year when they were more even,” said Jarden’s Fiona Mackenzie.
“Most days for the last six weeks, our retail trading desk has received two to three times the number of share orders as a typical day.”
Mackenzie said that in addition to existing clients becoming more active, there had been record numbers of new account applications — some days as much as 10 times normal levels.
“Clearly, many New Zealanders have used the lockdown as an opportunity to learn more about investing for themselves in addition to their continued investment via KiwiSaver,” she said.
Winners and losers
There have been both winners and losers from the pandemic.
Among the big companies, Fletcher Building this week announced that it would have to make 1500 people redundant because of the downturn in activity prompted by Covid-19.
On the plus side, AFT Pharmaceuticals’ net profit came in at $12.7m, up from a loss of $2.4m a year earlier.
The company said it had ramped up stock levels on a number of key products ahead of the Covid-19 pandemic arriving in Australasia.
“These actions have significantly helped the company to navigate the initial impact of the virus in its Australian and New Zealand markets,” AFT said.
What [lockdown] gave is that people at home finally got around to signing up.
Leighton Roberts, Sharesies