ASB Investor Confidence Report

CONSERVATIVE APPROACH HOLDING FIRM IN UNCERTAIN TIMES

• Term deposits and bank savings continue to hold top spots as best investments
• Rental properties hold strong as third most favoured position
• KiwiSaver confidence increases this quarter by 2%

In the close to 2008, 18% of investors opted for the surety and safety of term deposits as providing the best return of all investment types. That response, though down 3 percentage points from Q3, kept term deposits in top place.

Holding stable in Q4 were bank savings in second position at 16% of respondents; also unchanged were rental properties retaining their third position at 15%.

“This consolidation for term and bank deposits in the fourth quarter may have been cemented because of the retail deposit guarantee scheme”, says Jonathan Beale – Head of Investment Services, ASB. “Investors have had a bumpy ride and may be prepared to forsake higher possible returns in some of the more volatile investments, in favour of a good night’s sleep and a more modest but reliable return.

“Rental properties have held up well, which isn’t surprising given the lower mortgage rates for this investment type and the ongoing stability of rental income.”

Beale said that while overall investor confidence has retreated to some of the lowest levels seen in the past 10 years of this report from a net +3% in Q3 to a net -20% in Q4, the October to December period was one of the most volatile periods many people will have ever experienced.

The past year has also seen a 15 percentage point increase in the number of investors who view KiwiSaver as being their primary means of retirement saving. In Q4 2007, 31% of KiwiSaver users/intended users viewed the scheme as their primary savings vehicle, and this response has increased to 46% in the Q4 2008 report. Confidence in KiwiSaver also increased 2% this quarter to 6%.

“It’s great to see KiwiSaver continuing its uptake and also interesting to see that of this group of users/intended users, only 19% see KiwiSaver alone as being sufficient to support them in retirement. Other forms of retirement savings are likely to remain very important to retain people’s lifestyle.”

Despite the October to December period being a roller coaster ride for the world markets, confidence in both shares and managed investments remained steady on the previous quarter sitting at 7% and 10% respectively for the past 2 quarters.

Jonathan Beale points out “The attitudes toward shares and managed investments were surprisingly resilient given the turmoil that took place in global share markets over the quarter. Despite investor confidence being at the lowest it’s been in a decade, hitting the panic button should be avoided for long term investors.

“While the 2009 economic environment will be challenging, it is also important to realise that it may open up some investment opportunities to take advantage of, which could bear fruit in the longer term.

“Long-term investing involves deciding what your investment goals are and remaining focused on them. It is also about understanding and being comfortable with your level of risk and reward. There will be fluctuations in the market - the key to seeing these times through to the end is to remain calm and keep your ultimate objectives in mind.

“Now would be a good time to have a chat with your investment advisor, revisit your plans and formulate the best way forward to achieve your financial goals,” concludes Mr Beale.