Investor Confidence climbs out of the doldrums

Monday, 20 July 2009, 9:17 am
Press Release: ASB Bank

Media release
ASB Investor Confidence Report
20 July 2009

Investor Confidence climbs out of the doldrums

• Investor confidence turns for the better
• Rental property returns to previous No 1 investment position
• KiwiSaver numbers gain momentum

Investor confidence overall showed a net 14 point improvement from -25% to -11% in the second quarter of 2009, the first positive move for this measure since the third quarter of 2008. An impressive 8 percentage points of this improvement was recorded in the month of June.

“The first few ‘green shoots’started to appear from mid-March,” says Jonathan Beale, Head of Investment Services at ASB. “Equity markets began to show signs of recovery as a sense that the global recession wouldn’t get much worse started to take hold. This ‘could have been worse’ factor has no doubt contributed to the growing drop in pessimism seen over the quarter.”

Bank savings consolidate, but property is perking up
Bank saving accounts remain highly regarded as an investment at 17%, especially by the 50+ age group despite having dropped from the giddy heights of their 21% confidence peak last quarter.

“With early signs of more stable financial markets it’s likely that a wider range of investment categories may now re-gain favour in addition to the recent safe-haven allure of bank deposits. House prices have continued to remain high relative to incomes, despite having dropped over the last year, and with mortgage rates being low confidence in rental property investment has started to come back into favour,” says Mr Beale.

Confidence in term deposits remains strong, lifting a net 1% over the quarter to counter recent falls. Deposit rates did fall considerably through to Q1 in 2009, in line with the plunging Official Cash Rate. However, over the most recent quarter interest rates have been edging up again as competition for retail deposits continues to heat up.

Managed funds make a late sprint
Managed funds attracted relatively lack lustre support from respondents, moving down a net 1% to 9%, although the monthly figures show a late sprint in June with confidence increasing to 13% from May’s 5%.

“Investor confidence in managed funds will be one to watch as we climb out of the recession,” says Jonathan Beale

KiwiSaver Users
People saying they either use KiwiSaver or intend to do so have risen steadily since first measured in June 2007, with nearly one third of respondents now saving with KiwiSaver. This quarter also saw a significant increase in those who say they intend to use KiwiSaver and a significant decrease in those who say they won’t.

Confidence that KiwiSaver will be enough to support respondents in retirement increased by 3 points to a net 23%, but the vast majority of respondents still see the need for some form of supplementary retirement support.

ENDS

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