The Australian share-market has been surprisingly strong, however the market for online broking has been somewhat pacified. Although most investors have regained the majority of losses suffered during the global financial crisis, the lessons did not elapsed, the lessons have not been forgotten and the sentiment has indeed diminished this year despite the ongoing ambiguity.

The number of online share investors went up by 10 % in the second half of last year according to previous survey which marked the first ever increase since December 2011 yet it turned out to be a momentary spike.

In the last few weeks, specifically post-budget, we have seen a recession in the activities. The post-GFC highs were comparatively stable and while there is clearly a pick-up in the primary economy, investors are not at all feeling the optimism and compulsion to sell. They are not under an obligation to make purchases either therefore there is yet a pull-back in trading volumes.

A level of ambiguity regarding the strength of the recuperation of the global economy, particularly in China has hindered investor enthusiasm, despite the share market remaining relatively strong.
The S&P/ASX 200 Accumulation Index returned 20.18 % last year and with an annualised 12.46 % return over the past five years.

Mid-caps are getting more attention

Nevertheless, approximately 2000 margin loans were closed during the first quarter which brought the total number of active margin loans to 153,000. The total number of margin loans has diminished every quarter since then.

Retail investors have shown a strong preference for high-yielding stocks in recent years as the crash rates have been cut down to historic lows in which bond yields persist to defy expectations that they will rise as the global economy recuperates. High yielding stocks such as the big four banks namely; Wesfarmers, Insurance Australia Group, Metacash and Suncorp Group remain as the top pick.

­Analysts are cautioned that the high-yielding stocks have been re-rated well ahead of actual dividend growth coupled with the sector remaining very susceptible to an upward swing in bond yields in the coming months.

SMSFs still looking for yield

More and more experts are now recommending investors to lighten their exposure to come up with yield-sensitive stocks; should bond yields back-up there is a good chance that the real estate investment sector will give back its recent outperformance-specifically if the Australian dollar retraces which is very possible.

On the other hand, self-managed superannuation fund investors are very likely to strengthen long-term demand for high-yielding stocks. With the investment firm picking up 11 stocks that are likely to raise dividends from an average net yield of 2.5 % to 6.3 % over the next couple of years raises alarm on the sector.

Although trading activity still remains soft, brokers need to absorb significant impact on regulatory change in recent years. The new regulatory obligations specifically liquid capital and margining requirements designed to answer clearing and settlement risks as well as the corporate regulator’s cost recovery policy, are considered burdensome obligations in challenging the current market condition.

Investors have remained loosely attached in less risky investments such as cash and fixed-income products, instead of just plain equities. Capital raising activities has been at all all-time low and the impact of advances in electronic trading technology and high levels of competition in the stock-broking sector have merged to drive commission down to record low levels.

Users assemble to mobile trading

Online brokers are increasingly becoming more competitive in terms of services in pushing tablets and mobile trading as the rising trend driven by the market today. A lot of customers are using some sort of mobile device to check their portfolios and are now also starting to up their levels of mobile trading.

Brokers representing approximately 1/4 of the retail market also backed the ASX’s mFund initiative which let investors purchase and sell unlisted managed funds. It has the potential to bring managed funds into the same category as shares at the same time augmenting the role of brokers in the self-managed super fund sector.

Although this will definitely take time for investors and advisers to adapt to this new trading option, it will nevertheless substantially increase the range of securities that can be traded directly.

Finally, the efficiency in which investors can spend and divest will be very crucial to the enhancement and improvement of their respective investments. Furthermore, some advisers might also be given the option to circumvent platforms in order to save their clients in terms of fees and other operating expenses.

Last Updated: July 4th, 2014