Malaysian retail investors' trading participation in terms of volume declined by more than three percentage points last month as market volatility drove retail confidence away.
Data on Bursa Malaysia's website revealed that retail investors' trading participation was at 47.32 per cent, the lowest this year. It was at 50.45 per cent in May and above 50 per cent for the first five months of the year.
"I think retail investors were intimidated by the volatility and, therefore, backed off and stayed at the sideline. Retail investors don't like big daily swings - it's up one day and down the next. They like to see a consistent trend," Inter-Pacific Research's head of research Pong Teng Siew told Business Times.
Analysts said retail investors' trading participation in terms of volume was a good indicator on retail confidence.
"The lower participation from retailers could be also a result of the Euro 2012 football championship," said Edmund Tham, the head of research of Mercury Securities.
In June, the benchmark FTSE Bursa Malaysia KLCI rose by about 19 points to end the month at 1,599.15 from 1,580.67 early in the month.
The data also showed that retail participation in terms of value has declined from about 18 per cent in May to 14.73 per cent in June.
"I think retailers may feel that some stocks have run up quite a bit and are now too expensive for them. Plus, with the market volatility, investors may have put their money on other areas like fixed-deposit, gold and others," added Tham.
Nevertheless, analysts believed that it was only a matter of time before confidence in retail investors returned.
"Good news from the eurozone as well as the US will boost investors sentiment over time," said another analyst.
So far this month, it appeared that the retail investors are more active in trading stocks, one of the signs of retailers' confidence returning, analysts said.
For the first five days this month, retail participation in terms of value has been above the 23 per cent level.