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Getting their fair share

Friday 7th April 2000

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Jamieson and her flatmates Daryl Prasad and Monique Barden, are newbie traders, excited by those crazy tech stocks, lured into trading by cheap online broking fees and confident shares make better investments than do houses. Over dinner the talk is Net stocks and strategy; when friends come around, the flat transforms into a share-trading club. "Do you know anything about what's happening with [listed shell company] Aquaria 21?" laughs Jamieson.

These new traders could be at the cutting edge of a direct-investment revival. It could be that New Zealanders, especially young professionals, are doing it for themselves.

The theory squares with the experience of Tim Preston, head of ASB Securities. When the bank launched its new Internet trading site it hit a bonanza of new customers. "We were swamped with business and a very noticeable percentage of those customers are a new type of share investor." The new traders don't fit the stereotype: they're young, inexperienced (often first-time traders), don't own mortgages, they chase growth stocks and don't like paying high fees to be told what to do - "though we need to hold their hands a little".

Access Brokerage's boss, Peter Marshall, reports the same profile. "There's a group of young-bloods; they're well-educated, urban apartment dwellers, with nice cars, no mortgages; they're a noticeable new group," he says.

The spectacular success of the Net stocks seems to be a key driver (see box, page 26), but it's not the only one. Latest research from ACNielsen's Consumer Finance Monitor shows a trend since 1994 toward hands-on investment. Direct share investing is up from 11% of the adult population in 1994, to 16% in 1999; but during the same time, the proportion of adults aged 15+ holding term deposits and superannuation funds has fallen; there's no real change in the proportion holding unit trusts and managed funds. The number owning investment property is up; but home ownership is down.

"The changes are fairly small, and there are complicating factors such as customers moving small term deposits to savings accounts; but, put together, the changes suggest there's a shift to a more hands-on approach to investment," says ACNielsen director Gary Martin.

The proportion of people owning shares is still far less than in Australia and the United States (both edging towards 50% of the adult population). It's also half of what is being trumpeted by the New Zealand Stock Exchange, responding to criticism from Unlimited and others (see "Slop Exchange", February Unlimited). But at least it's up. Does it mean New Zealanders finally are getting serious about managing their financial affairs? Or are they just responding to low interest rates?

"Interest rates have a lot to do with it, but I think the message from the Retirement Commission and from the media about the need to save is finally getting through," says David van Schaardenburg, managing director of managed funds researcher, IPAC Securities. He disagrees, though, that the trend is away from managed funds. His figures show the total New Zealand funds under management has risen from just under $3 billion in 1991 to $17.2 billion last year. "That growth has got to come from somewhere. Typically, new money going into funds tends to be 80% from new customers ... The penetration of managed funds is a lot lower than in Australia or the United States."

ASB investment services manager Roger Perry steers a middle course. "Managed funds and direct investment are not mutually exclusive. If our experience is saying anything, it's that New Zealanders are doing both - at the expense of bank deposits and property."

Like we said, this could be big. But let's just wait until interest rates turn or the Net stock bubble bursts.

Vincent Heeringa

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