Retail investors shun ASX for Wall Street as tech shares boom

Australian retail investors shunned the local share market last year and turned to Wall Street – a trend that is unlikely to abate in 2024 amid the craze surrounding artificial intelligence and a growing market consensus that the United States will avoid a recession.

Tesla topped the list of the most traded stock in 2023, with tech stocks Apple, Amazon, Microsoft and Nvidia – the world’s biggest maker of the specialised chips needed to power AI products – rounding out the top five Wall Street stocks, according to data from online broker Stake.

Wall Street Shuffle: Australian retail investors shunned the ASX last year.
Wall Street Shuffle: Australian retail investors shunned the ASX last year.Credit: Reuters

Locally, Vanguard Australian Shares Index, which tracks the ASX 300, was the most bought stock, followed by exchange-traded fund (ETF) iShares S&P500, lithium player Pilbara Minerals. ETFs Vanguard MSCI Index International Shares and Betashares Nasdaq 100, and mining giant BHP Group, rounded out the list of most bought securities on the ASX.

“Given the outperformance of the US market last year, and particularly strong run in recent months, we’re continuing to see Australian investors show a bias for that region,” Stake market analyst Megan Stals said.

“Three of the top five most bought ASX securities on Stake in 2023 were exchange-traded funds with US exposure … This is continuing to play out in January so far – fuelled by the ongoing positivity towards AFI, and the growing consensus expectation that the US will avoid a recession.”

The tech-heavy Nasdaq last year soared 43 per cent, Dow Jones climbed 13 per cent, while the S&P500 rose 24 per cent. The S&P/ASX200 lifted by 7 per cent, with most of that growth concentrated in the final quarter of the year. It has been a more subdued start to the new year, with Wall Street inching higher and the ASX falling more than 2 per cent since the start of this month.

Rival broker nabtrade’s director of investor behaviour, Gemma Dale, said apart from the December rally, the volume of trade in the market had fallen substantially in recent years, and most of the activity was concentrated among older and more experienced investors.

“In 2023, they were buying CSL and Resmed (healthcare) but trimming now, and selling/trimming materials into the rally at the end of the year (especially Fortescue and BHP), and energy (Woodside). They’ve been rotating through those stocks in particular, buying on weakness, selling on strength,” Dale said.

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Dale said lithium’s status as red-hot sector a few years ago had waned since the beginning of 2023, as the price of the metal plunged 80 per cent in 12 months.

The lithium carbonate spot price has dropped to its lowest level since August 2021, trading at US$15,182 per tonne following declining demand from China and increased global supply.

Shares in locally listed lithium miners Core Lithium crashed 80 per cent in a year, IGO fell 49 per cent, Allkem was down 21 per cent, Mineral Resources declined 30 per cent, and Pilbara Minerals slumped 13 per cent.

Pilbara Minerals and Core Lithium were the second and third, respectively, most traded stocks on Stake, but by the final quarter of 2023, they had fallen to fourth and tenth place.

“Passive investing and ETFs are undoubtedly growing in popularity, but the trend has likely been amplified in 2023 due to challenges in picking strong, individual growth narratives on the local market,” Stals said.

“Unsurprisingly, investors have continued to seek exposure to [the] biggest AI names — including
Nvidia, Microsoft and Google, which are broadly tipped to see strong returns in 2024 according
to analysts – yet there’s growing interest in smaller players as investors look to find the next big
opportunity.”

Stals is also expecting the narrative on Tesla to shift this year as Chinese competitor BYD overtakes it as the world’s biggest electric vehicle manufacturer. Tesla shares have fallen sharply in the opening weeks of 2024.

Consumer staples (down 7.77 per cent), energy (down 6.8 per cent) and mining (down 5.01 per cent) stocks were the worst performers on the local share market over the past year, according to CommSec. Local tech stocks tracked the gains on Wall Street, and soared 25.79 per cent.

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Source: Thanks smh.com