Investor confidence disappears

Wednesday 23rd April 2008

ASB says that investor confidence "took a turn for the worse" in the quarter to March 31. That's an under-statement as the reality is it evaporated.

The bank's latest confidence survey shows that those expecting investment returns to be better over the course of the next year dropped significantly.

In the previous quarter 29% of respondents expected to get better returns over the year and 10% predicted worse leaving the confidence level at 19%.

In this latest quarter 28% expected better returns while the perecentage expecting worse returns rose from 19% to 29% leaving an investor confidence level of minus one per cent.

"This is the lowest net confidence level since late 2001, right after the 9/11 terrorist attacks rocked the world and investors were experiencing the fallout from the dotcom bust," ASB says.

"There have been a lot of recent events that have combined to dent investor optimism. Sharemarkets have been weakened, the housing market is clearly softening, and there has been growing pessimism about the economy," ASB Head of Investment Services Jonathan Beale.

Of particular note is that rental property has lost its shine as has listed shares and bank savings accounts.

Two products investors have confidence in are term deposits and managed investments ex Kiwi Saver.

ASB says the 4% rise shown by term deposits, to 16%, is the highest level ever recorded in the survey.

It comes about a month after ASB made big increases to its TD rates and other banks, particularly Kiwi Bank, are offering strong rates.

"Possibly, the more uncertain economic environment is encouraging investors to place a higher weight on the relative security and certainty of term deposits, the higher interest rates now being offered also increasing confidence in this form of investment," Beale says.

Rental property remains the category investors are most confident will produce a return. However, it too has taken a knock, down 3 points to a net 19%.

A surprising result is the increased confidence in managed funds (excluding KiwiSaver) as recent fund flow figures show the sector is suffering big outflows.

ASB says that 76% of respondents continue to believe KiwiSaver will encourage New Zealanders to save for their retirement.

There was also a rebound in the number of people seeing KiwiSaver as the primary vehicle for retirement savings amongst those either already investing in KiwiSaver or intending to use it as their main investment vehicle.

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