MONDAY 2 AUGUST 2004
Robust Economy Keeps Investor Confidence Levels High
Investor confidence bounced back to near record levels in the second quarter of 2004, thanks to a predominance of positive economic news, according to the ASB Bank.
Results released in the latest quarterly ASB Bank Investor Confidence Survey show a nett 21% of respondents believe their investment returns will be better this year, up two percentage points from the first quarter of 2004.
“Levels of confidence amongst investors have fluctuated on a month by month basis recently, but the results of the survey over the past few quarters have been relatively stable,” says James Mitchell, Head of Relationship Banking and Financial Services, ASB Bank. “This reflects the general sentiment that a lot of the surprise and volatility expected by investors has been priced into markets and investors believe the economy is in robust shape.
“While factors like rising oil prices and the threat of terrorism are of concern to investors, the international equity markets have performed well, and New Zealand companies continue to report strong results.”
Confidence in residential rental property remained stable in the second quarter, although the gap between this and the other investment types measured has closed over recent quarters.
“At the peak of the recent property cycle the survey showed twice as many respondents thought residential rental property provided the best return compared to the next highest investment type. Although we have not seen the widespread fear of a residential property downturn realised, we are seeing the gap in confidence between residential rental property and other investment alternatives, such as managed funds and term deposits, slowly narrow.”
In the survey’s measurement of those commenting on their “current main investment”, confidence amongst investors with managed funds jumped 13% to 51%. This supports the generally good performance of managed funds over the last 12 months. For example, ASB Bank’s typical balanced managed fund has returned 9.45% over one year after annual fees and tax.*
“These results indicate that people are becoming more balanced in their beliefs about which investment type provides the best return. Hopefully we will see more diversification in investors’ portfolios, with fewer investors taking more risk than necessary by relying on the success of a single asset class.”
Overall 31% of people expected their nett returns from investments to be better this year compared to last year, unchanged from the first quarter of 2004. Only 10% of respondents believe their nett returns from investments will be worse, down 2% on the first quarter. Close to half of those surveyed (45%) believe their nett returns will stay the same.
* ASB Bank Balanced Strategy