Johannesburg — THE Sanlam Investment Management investor confidence indices' November survey shows that the respondents increasingly consider the equity market to be expensive and they expect returns to continue to decline.

"The v aluation confidence index dropped to its worst level since inception. Among institutional investors the valuation concern remains more pronounced," Frederick White , head of asset allocation research at Sanlam Investment Management, said last week.

The indices showed 45% of respondents said the market was too expensive and just 2% thought it was too cheap.

Sixty-four percent of institutional respondents said the market was too expensive, while not one thinks it is too cheap. "On average the respondents expect the equity market to be up by only 6,1% in the next 12 months, with institutional investors being less optimistic with an average expected rise of only 2,9%.

"The institutional investors' average view implies that even once dividends are included, the total return on equities in the next year would just about equal inflation and hence one would get no real growth from equity investments," said White.

The respondents were even more pessimistic about returns from equities in the very near term, with expected rises of only 0,7%, 0% and 2,2% in a month, three months and six months respectively. Institutional investors held a more negative outlook, with falls expected over all three periods, of 0,7%, -1,6% and -1,8% respectively.

"The c rash c onfidence and p ost-d ip r ecovery indices also did not indicate any sign of confidence among equity investors.

"The c rash confidence i ndex fell to 66% from 68%, implying a small increase in the percentage of respondents who deem the probability of a crash to be more than 10%, while the buy-on-dips index remained stationary at a level of only 42%," White said.