Investor Sentiment Remainx Pessimistic

Investor Sentiment Remainx Pessimistic

 
New Zealand first quarter investor sentiment remained pessimistic even with a slight recovery– says ING Investor Dashboard Survey
 

Key Highlights of the first quarter 2009 ING Investor Dashboard Survey

·         New Zealand high net worth investors had a “pessimistic” outlook during Q1 2009, according to the ING investor sentiment index and few New Zealand investors expect the economic situation to improve in Q2 2009

·         The New Zealand investor sentiment index score is still down 26% over the 12 month period, from a score of 90 in Q1 2008, even though the index recovered by 8% to 67 for Q1 2009 from 62 for Q4 2008

·         Nine out of thirteen markets surveyed were pessimistic, but the overall Pan-Asian Index* moved out of the “pessimistic” range, recovering 16% to 85 for Q1 2009 from 73 for Q4 2008, due to strong recovery in sentiment by investors in China and India.

New Zealand private, high net worth investors index score of 67 out of 200 remains in the “pessimistic” range even though there was an 8% recovery in confidence during the first quarter of 2009. This is according to data released today from ING, the global financial services group, as part of its quarterly ING Investor Dashboard Survey.

Stuart Millar, Investment  Strategist, ING New Zealand, said, “The findings from the survey are consistent with the investor sentiment readings we are getting from offshore. Despite equity markets making new lows during the quarter, investor sentiment has not become any more bearish than in the fourth quarter last year. This may be a sign that investors have come to expect the worst in regard to earnings results and economic growth.

“The survey shows us that in New Zealand the market opinion is divided between those who think the economic situation will get worse, and those who think it will either remain the same or improve. However, the index score rating is still in the pessimistic range.”

While there are 29% of local investors who believe the economic situation will improve in the second quarter 2009, 48% of New Zealand investors believe the economic situation will deteriorate.

New Zealand investors growing more confident in government’s handling of the economy

The survey suggests New Zealand investors are becoming more confident in their own government’s ability to withstand the local effects of the current global slowdown, with 29% supporting the new National-led government’s policies on investment, up from 11% a year ago in Q1 2008. 46% of those surveyed believe the new government’s impact on the economy has been favourable, while 19% answered the government has had a very favourable impact.

New Zealand investors remain confident in their job security despite the current economic situation, with an increase of six to 66% saying the recession will not impact their job.

Concern for inflation remains high amongst New Zealand investors, contrary to the majority of countries in the region, with 59% of local investors expecting inflation to rise in the next quarter and only 18% expecting it to decline. In Australia only a third, 37%, expect inflation to rise, while 26% expect inflation to decline.

22% of New Zealand investors expect the stock market will rise in this quarter, up from 17% in the last quarter, while 52% believe it will continue to fall heading into the second quarter of 2009.  This is a slightly less pessimistic outlook than that of investors in Australia, where 62% expect to see the stock market falling further in Q2 2009.

While New Zealanders share the view amongst investors across the region that the instability in the US financial sector is the main contributor to the global financial crisis, 86% of local investors say the US economic stimulus package will have no impact on their investment decisions.

Millar noted, “The majority of the NZ investors in the survey typically had conservative asset allocations and also largely invested in residential real estate, therefore the success of the global stimulus measures would have less immediate impact on their investment decisions. However, for riskier investments such as equities , the success of measures taken by policy makers and central banks around the world to stabilise the financial system will be of paramount importance to the performance of these asset classes.

“We are incrementally becoming more confident that the policy framework is in place to restore global financial stability, but we don’t expect investors to become fully engaged in riskier asset classes until there are signs that the global economic recession is nearing an end.”

New Zealanders are the most conservative investors in the region

The effect of the credit crunch was the biggest concern for New Zealand investors, registering higher than the impact of the US economy on their investment decisions. 79% of NZ investors in the last quarter were affected by the credit crunch, compared to 50% who say they were affected by the US economy. Investors maintain the same outlook on these questions heading into Q2 2009.

New Zealanders remain the most conservative investors in the region with 54% taking a longer term investment strategy, with capital preservation the priority, compared to 43% of Australian investors who are taking a conservative strategy.

Asked whether New Zealand investors had seen a return on investment in the last quarter, 8% say they saw ROI increase, while 69% say their ROI decreased. Looking ahead into Q2 2009, 46% expect to see a decrease in their investment returns, while 18% feel they will see an increase.

Investment intentions for second quarter 2009
·         39% of NZ investors will invest less and reserve more cash in the next quarter.  Another 55% have not decided what to do with their investment yet.  Only 6% (the lowest in the region) will invest more

·         63% of New Zealand investors surveyed are currently holding investments in local residential real estate (besides their own domestic property)

·         29% currently hold investments in both USA and Europe, with 17% of those investments in the UK

·         Of those NZ investors who hold overseas investments, 20% currently have investments in China.

The overall pan-Asia (excluding Japan) index score has recovered by 16%, pulling the index out of the “pessimistic” range, back into the “neutral” range of sentiment. The improved sentiment recorded in Asia-Pacific is driven by a rally in the investor confidence of Asia’s twin engines of growth – China and India. However nine out of the thirteen markets, including New Zealand and Australia, registered scores in the “pessimistic” range.

Mr Millar, ING Investment Strategist, said,  “The surge in confidence in India and China shows in their index scores of 133 and 124 respectively, almost double New Zealand’s score and six other markets in the region.

“China and India have been key driving economies in Asia and they still maintain growth forecasts for GDP of 7% and 5% respectively. In general, there is confidence the Chinese government will be ready to step in to help support the economy where necessary and with the recent 4 trillion-Yuan, two-year economic stimulus package, it is not surprising to see their investor confidence rise.”

Investor sentiment across the range of questions about the markets remains fairly stable, with marginal changes in their index scores, indicating investors are taking stock of developments and are awaiting signs of where the financial and economic crisis is headed.  With shrinking global demand for exports and commodities, New Zealand investors and their Southeast Asian counterparts are still more cautious about the current global financial and economic crisis than the top four ranking markets in the survey. (See table below.)

Millar concluded, “The global financial and economic crisis is not something that China and India, the two growth engines in Asia, can solve alone. Until the US and Europe begin to recover from the crisis,  it’s best to be  cautious in terms of expecting  global economic recovery, although investors should be aware that markets tend to anticipate an economic recovery before it becomes apparent.”

The ING Investor Dashboard is the first quarterly survey in the Asia Pacific region that provides a pan-Asia (excluding Japan) investor sentiment index. The survey is conducted quarterly across 13 markets* in Asia Pacific, and not only provides market insights on investor attitude and outlook but also allows each market to be benchmarked and tracked against the overall investor sentiment across Asia using the pan-Asia index.  

 ends

© Scoop Media