Retail investors eyeing cheaper equity options, energy sector: Goldman Sachs

Tue 21 Jun 22, 11:17am (AEST)
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Key Points

  • Goldman’s head of derivatives research says ETFs and single stock options have become retail investors’ favoured assets
  • Purchase of ordinary shares is higher in the energy sector
  • Despite sell-offs and weakening buying power of retail investors, participation is still at a baseline higher than pre-covid

Retail investors have turned from buyers into sellers in the last five months, according to Goldman Sachs, but there are some caveats. 

Inflows into the Exchange Traded Funds (ETF) market remain consistent on 2020 and 2021 levels. 

Last week, InvestSmart’s chief strategist Evan Lucas told Market Index news the same thing: that Australian investors are still hungry for ETFs, which generally allow cheaper access to big-name stocks. 

Lucas went one step further than Goldman’s and claimed ETF purchases in Australia were the highest they have ever been.

Goldman Sachs also notes the single stock options market grew fourfold in 2021 on 2019 levels, and remains popular to retail investors looking to continue investing while spending less money.  

Performance of the ASX Energy Index over the last 12 months compared to the ASX200
Performance of the ASX Energy Index over the last 12 months compared to the ASX200

There is, of course, an exception 

One sector where retail day trading activity remains somewhat heightened: energy sectors rejuvenated by high oil and gas prices.

Four years ago, the energy sector was seen as undesirable, given rising attention on climate change and pro-ESG sentiment. 

Since the start of covid, however, every oil and gas supermajor on earth has since posted all-time-high profits.

Australia, too, is seeing its energy sector revival play out, with Woodside Energy (ASX: WDS) still keenly developing the offshore WA Scarborough development. 

The evidence of this is clear in the Australian context: year-to-date, the ASX 200 Energy Index (XEJ) is up 24.95%, despite sell-offs hitting world markets. 

Conversely, retail investor participation is higher than pre-covid 

Goldman Sachs makes one note which underscores the complicated nature of world markets: retail participation is actually at a higher baseline than it was before covid. 

“I think we’re finding out steady state in terms of retail participation,” Goldman Sachs Electronic Trading Strats Manager David Jeria said. 

“I think it’s going to look like 15% for the near future.” 

Jeria pointed towards low-commission stock trading platforms and “gamification,” hinting at the increasing participation in equity markets by younger investors.

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Written By

Jonathon Davidson


Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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