Retail shareholder sentiment remains gloomy about the Australian stock market, according to the latest Global Proxy-Melbourne Institute Shareholder Confidence Index released Monday. This comes after precipitous falls in share prices on global markets.

According to the latest survey conducted during the first of this month’s share price plunges in early August, the shareholder index fell by 14.6 per cent to 93.6 compared with the previous survey in May 2011 which was at 109.6. It was also 20 per cent below the 117.0 level that the index recorded in August 2010.

“Since we began tracking the confidence of Australian shareholders more than two years ago, the index has emerged to become an important leading indicator of the market’s performance,” said the Melbourne Institute’s Professor Guay Lim.

“It is now showing that investors expect shares to remain weak for months ahead.”

The index started to track down early this year, several months before actual share prices began to weaken. The quarterly changes since then have been negative.

“We can say with some degree of certainty that the latest index suggested that shareholders had become even more pessimistic about conditions in share markets,” Lim said.

“While shareholders expect volatility to abate and buying intentions still dominate, bearish attitudes have surfaced quite noticeably.''

This could be promoted by the historic downgrading in the U.S. sovereign debt rating and the spread of debt problems in Europe into large EU members including Italy, Spain and France. There is considerable uncertainty about how increased global uncertainty will affect the Australian economy.

Domestically, the uptick in unemployment and the legislation soon before the federal Parliament for a carbon tax and mineral resources tax could be further causes for concern.