Investor confidence buckles

 Investor confidence took a turn for the worse during the March 2008 quarter, according to the latest ASB Investor Confidence Survey.

Those expecting investment returns to be better over the course of the next year dropped only 1% to 28%. However those expecting poorer returns rose sharply to 29%, resulting in a move from a net 19% positive last quarter to a net 1% negative overall investor confidence level for the March 2008 quarter. 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.

“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,” says Jonathan Beale, Head of Investment Services, ASB.

“The proportion of respondents expecting better returns actually changed very little, so the cup remains just as full as ever for one segment of investors. The huge fall in net confidence came from a significant 19% lift in those expecting worse investment returns.”

Term deposits gain ground
Confidence in term deposit returns lifted markedly over Q1 2008, up 4 points to 16% - the highest level ever recorded in the ASB Investor Confidence Survey.

“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,” says Mr Beale.

“In contrast, confidence in bank savings edged down as investors can often do better by moving out of call accounts into term deposits.”

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%.

More see KiwiSaver as main vehicle for retirement savings
Confidence that managed funds (excluding KiwiSaver) will produce the best return actually increased to a 15% (from 13%). However, given the rough start to 2008 for sharemarkets globally, confidence in publicly-listed shares decreased from 9% down to 5%.
Meanwhile, 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 (up 6 percentage points to 37%) amongst those either already investing in KiwiSaver or intending to use it as their main investment vehicle.

Given the significance of KiwiSaver for New Zealanders this form of investment is now reported separately to other managed investments. For the March 2008 quarter, 5% of respondents believe KiwiSaver is providing the best return, although this is significantly higher for those investors already using KiwiSaver as their main form of investment. Interestingly, a high 87% of respondents who either use or intend to use KiwiSaver do not think their KiwiSaver savings alone will be sufficient to support them in their retirement. It is seen as a supplementary source of retirement income at this stage.

“As time goes on it shows more people are beginning to recognise the role KiwiSaver can play in their retirement. We have to remember KiwiSaver has only been available in New Zealand for a short time and it’s going to be really interesting to watch its growth over years to come.”