Investor Confidence - Optimistic And Confident
Statement made by James Mitchell, Head Of Relationship Banking and Financial Services, ASB Bank
The mood of the country’s investors remains optimistic, with confidence as measured by the ASB Bank Investor Confidence Survey remaining in excess of a net 20% for the second consecutive quarter.
Only once in the past 10 years has confidence levels eclipsed the current net 21% level, and that was in the last quarter of 2003 when investor confidence peaked at a net 24%.
Never before has investor confidence stayed above the net 20% mark for more than one quarter.
Given the high returns that have been achieved by investors across a range of asset classes over the past 12 months, which has a natural tendency to curb immediate future expectations, this level of confidence is extremely encouraging.
It also has to be seen against the backdrop of widespread talk of a New Zealand economy about to slow and concerns about the effect of high oil prices on the global economy.
A feature of this quarter’s results is the growing confidence being shown by sharemarket investors, a trend that has been developing over the past 12 months.
The New Zealand sharemarket has been performing well and the gross return of New Zealand shares was 5.1% over the September quarter as measured by the NZX50 Index, and 24% over the 12 months to September 2004.
Of those with shares as their main investment, 67% consider shares will provide the best investment returns. This confidence is up strongly on 2003 and now puts share investors on a par with residential property investors, with a similar number ( 67% ) remaining convinced that property offers the best return.
It would appear that the strength of the NZ economy is encouraging investors in general to look to the promising long-term prospects for New Zealand and, in particular, is encouraging property investors to look beyond the present cyclical housing slowdown and see the bright longer term outlook for housing. Age is a major factor influencing confidence and attraction of an investment asset class. Those under 60 have greater confidence in residential property and managed funds while those over 60 have greater confidence in term deposits.
The confidence levels of those whose main investment is in term deposits has doubled to a net 24% over the figure for the previous quarter as they anticipate term deposit rates will rise on the back of expected increases in the Official Cash Rate.