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Confidence Rises Amongst Investors

9 October 2006

ASB INVESTOR CONFIDENCE REPORT

Confidence Rises Amongst Investors

- Overall investor confidence up three points to 19 percent
- Residential rental property confirmed as investment judged to provide best return
- Only two thirds of investors are aware of Kiwisaver

Investors appear to have put any concerns they had with the volatility in the local and global economies behind them, according to the latest quarterly ASB Investor Confidence report.

When asked: Do you expect your net return from investments this year to be better or worse than last year?

Overall investor confidence rose in the third quarter of 2006, up three points to a net 19%. The main cause for this rise in confidence was people changing their outlook from worse (down from 14 percent to 12 percent) to the same (up from 43 to 46 percent). Those who expected their net return from investments to be better in the next 12 months rose marginally from 30 percent to 31 percent.

“Investor confidence in the third quarter of 2006 has gone back up to its historically high level,” said Jonathan Beale, Head of Investment Services, ASB Investments. “While we continue to get mixed messages about the performance of asset classes in New Zealand and overseas there is enough good news in key indicators such as equities, employment, and housing to drive confidence.

“The rise in the number of investors who expect their returns to at least stay the same over the next 12 months reinforces the last quarter’s optimism.”

When asked: What type of investment gives the best return?

Despite rising interest rates, the cooler housing market and lower rental yields, residential rental property remains the highest ranked asset class – stable on a net 19 percent.

- More -

The most notable result this quarter was the tailing off of term deposits and bank savings accounts, down four percent and one percent respectively.

“It is a real surprise to see drops in confidence with savings and term deposits, given the rates currently available in the market and the continued success of high interest call accounts,” said Jonathan. “It will be interesting to see what confidence levels are like in the final quarter of 2006, particularly with residential rental property, given the number of mortgages that will be re-fixed over coming months.”

When splitting investors by region and asking them what investment gives the best return between residential rental property and managed investments, regional variances continue. The lower North Island shows the biggest single change in sentiment - having been neck and neck for the last few quarters a noticeable gap in confidence by investors in the lower North Island has opened up between residential rental property (a net 20 percent) and managed investments (a net 12 percent).

Meanwhile investors continue to have more confidence in residential rental property in the upper North Island and South Island.

“There has been a fair degree of volatility in this measure over previous quarters and, other than a correction by North Island investors in line with the rest of the country, it is difficult to speculate on the cause of this change.”

Question of the Quarter: Are you aware of Kiwisaver?

A new element in the ASB Investor Confidence Report is a question that will be changed for each quarter. For this report all respondents who had investments were asked if they were aware of Kiwisaver. Just over two thirds of those with investments said yes they were aware of Kiwisaver.

“While there is no benchmark, you would expect a high percentage of people with investments to be aware of Kiwisaver,” said Jonathan. “What was interesting was that when you broke down the results by age you could see a trend that may need to be addressed as Kiwisaver is rolled out. Only half of those under 30 years of age knew what Kiwisaver was, while over 70 percent of those aged over 40 were aware of it.”

In the ASB Investor Confidence Report for the fourth quarter of 2006 respondents without investments will be asked the same question.

ENDS

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