Sentiment Indicators - ING Investor Dashboard Sentiment Data - Student's Post

Quote of the Day: “Far from the madding crowd’s ignoble strife, Their sober wishes never learned to stray; Along the cool, sequestered vale of life They kept the noiseless tenor of their way”
It’s too much to expect that Investor Sentiment surveys have any kind of normal predictive value – usually, the only way they are used in the US is in contrarian manner, taking the surveyed investors as “dumb money” that buys at the tops and sells at the bottoms. Here we investigate the Singapore and HK corollary of these surveys.


A few points to note:

• This survey only began in Oct 2007, and is done quarterly, so we don’t have a lot to go on. Q3 2010 is also not posted on the website – you can only find it here after some hard searching.
• To their credit, investors actually turned neutral in early 2008 BEFORE the massive drop in the indexes in late 2008 – but only turned truly pessimistic after the drop. Hong Kong investors embarrased themselves going optimistic again during the drop.
• Slow on the uptake. SG and HK investors remained pessimistic until the recovery was well and truly underway, with most of the profits from that already gone.

As a public service I have released my compiled data source so others investigating this can have quick access. ING does not provide the FULL data in time series as I have done.
Takeaways for investors

• The ING Sentiment Index appears to have no conventional predictive value in crisis times.
• It is also of limited contrarian value in non-crisis times – sentiment has stayed well above Optimistic levels for the entirety of 2010 when markets did indeed go up.
• However SG and HK sentiment have been optimistic for a very long time, and have already dipped once. I do not think it would take a lot for this sentiment to reverse.