Media release

ASB Investor Confidence Survey, Q2 April - June 2011

EMBARGOED UNTIL 0100 TUESDAY 16 AUGUST

Investors not convinced by market improvements;

confidence drops in Q2 2011

* Investor confidence dropped seven points in Q2 2011 * Investors turning to perceived lower risk investments despite market improvements * KiwiSaver popularity dropped following changes announced in Budget 2011

Investor confidence continued to decline over the three months to June, according to the Q2 2011 Investor Confidence Survey.

ASB's Head of Private Banking and Wealth Management Jonathan Beale says the ASB Investor Confidence Index fell by seven points to a net 3 percent, indicating that those who believe their investment returns will get better or worse are almost evenly split.

"Overall the index has fallen in the second quarter, but looking at a month-by-month breakdown we can see that confidence levelled out to an average net 3 percent after taking a plunge in March following the February quake," he says.

"The strengthening local economy could create more optimism among investors in the coming months. However the recent uncertainty around the US and Europe and the impact of these issues here in New Zealand, may mean that investors continue to look to perceived safer investment options."

Caution reigns amongst investors

A total of 21 percent of investors felt that Term Deposits offered the best value of all investment types, up 2 points from last quarter. Rental property climbed one point to 16 percent, followed by bank savings accounts steady on 12 percent. KiwiSaver dropped 3 percent to 9 percent, equal with managed investments / Unit Trusts / Superannuation. Shares climbed 2 points to 8 percent.

"The results indicate investors are incorporating their desire for security into their assessment of best returns, and are still turning to Term Deposits and Rental properties over other investments. The attitudinal shift was driven by respondents in Auckland, where investor favour moved back to Term Deposits, up from 17 to 22 percent, ahead of rental properties which fell from 19 to 14 percent. This could well be due to changes to tax on property investments announced in Budget 2010, which came into force on April 1 2011. However the rest of the country did not share this sentiment, with rental property climbing 3 points to 16 percent and Term Deposits climbing just 1 point to 20 percent."

"Several other factors will be contributing to investor caution, including the February earthquake as well as Government debt levels in Europe and more recently in the US - although the data for this survey was collected before the US credit downgrade. Recent events are likely to contribute to further investor caution in the near term. Nevertheless, returns from managed funds have had strong performances, highlighting that there is a potential cost to prolonged investor caution," he says.

KiwiSaver popularity stalls

"KiwiSaver took a hit in the popularity stakes this quarter, dropping from 12 to 9 percent as the investment that offers the best return," Mr Beale says.

"The changes to KiwiSaver announced in Budget 2011 appear to have shifted investor perceptions of KiwiSaver. The swing in attitude can also be seen in the 6 percent drop in the number of people that think KiwiSaver will encourage New Zealanders to save for their retirement, from 75 percent to 69 percent.

"However out of those using or intending to use KiwiSaver, a record 63 percent said it would be their primary source of retirement savings, and this percentage has been slowly edging up over the past year. For this reason we see the drop in KiwiSaver popularity as a downward blip in the short term.

"It remains to be seen whether this downward blip becomes a trend over the long term, but our feeling is that the success of KiwiSaver will see it pick up in popularity again in future."

ENDS

BUDGET 2012:
Parliament Debate Live - Video Of Budget 2011
Keith Ng Interactive Graphic: How the Budget Breaks Down
BUDGET 2012 - FULL COVERAGE: Reports / Analysis - Press Kit - Reaction (from everybody) - Previews (from everybody) - Pre-Budget Announcements

Gordon Campbell: On the Budget’s Spreadsheet Victories

It wasn’t as if expectations were sky high, exactly. Chances are, it was always more likely that we’d be seeing Bigfoot rampage through the Beehive lock-up than catch a glimpse of a credible growth agenda from this government. More >>

Sludge Budget Report - Short The Dollar! MEMO: To international bankers FROM: C.D. Sludge Please short the dollar! It'll be good for both you and us. And you know you want to. Greexit, Eurogeddon... watch out... flight to quality and all that. Follow your instincts. The NZ Debt Management Office has been so surprised at the unprecedentedly low interest rates that it can borrow at that it has already entirely pre-funded the 2013 fiscal deficit - all $8 billion of it! More >>

Pattrick Smellie Comment: Doddling along the best we can hope forCriticising Budgets for lacking vision or imagination is like shooting fish in a barrel, but even so, this year's Budget again feels like a missed opportunity. Perhaps it's the intrusion of real world needs that means the government couldn't make better political use of the $558.8 million it expects to gather in its first partial asset sale. More >>