ASB Investor Confidence Report Q2 2013
Investor confidence slips from previous high
· Overall investor confidence falls from highest point in two years.
· Share market builds in popularity for investors.
· Property starts to lose its best return expectation for young investors.
Investor confidence has headed south for the winter according to the latest ASB Investor Confidence Survey.
ASB Head of Wealth Advisory Jonathan Beale says, “The ASB Investor Confidence Index has fallen 7 points from a high of net 18% in the previous quarter, to a net of 11% in the three months to June.”
Mr Beale notes the fall in optimism is intriguing as it was mainly driven by investor confidence dipping to a low of 3% in April, before recovering during the remainder of Q2 2013.
“When we look back to see what events might have caused the decline in confidence, it appears that it was related to uncertainty about events overseas rather than local issues. The situation in Cyprus was receiving a lot of air time earlier in the year, so clearly there was a knock-on effect for investors here as it may have been weighing on their minds,” says Mr Beale.
However, overseas uncertainty did not dent the popularity of the New Zealand share market, with respondents’ expectations that public shares will have the highest returns jumping up 2 points to 12%.
Mr Beale says, “Shares have surged and are clearly in the sights of investors as they seek higher yields. That level of confidence in return on investment from public shares has not been seen since the beginning of 2007.”
Meanwhile, net investor confidence in the Canterbury region remained stable at 20%.
Mr Beale notes, “This is the second quarter that confidence has been higher in Canterbury than the rest of the country. The gathering rebuild momentum is clearly boosting investor confidence in Canterbury. At the same time, it is highlighting the growing gap between Canterbury and the net confidence of the rest of New Zealand which is down 7 points to 10%.”
In what Mr Beale sees as a reflection of the current house price concerns, nationwide rental property dipped 2 points to 17%, and is now sharing the top spot as the most attractive investment class with Term Deposits, which jumped 2 points to 17% of respondents.
“This is the first time in three quarters that nationwide rental property has not been viewed as the asset solely most likely to provide the best returns for investors. Optimism for returns on rental property may have been affected by talk of an over-heated house market and the RBNZ reaching for its macro-prudential tools.”
Mr Beale adds, “What is also of interest is this quarter we started to see the emergence of a property divide between young investors and the not so young investors.”
Investors aged 18 to 29 years perceive KiwiSaver as offering the best returns with it peaking at 17% of respondents, while their optimism for rental property declined 7 points to 14%.
Yet, investors in the age group 40 to 49 years are more optimistic that rental returns will give the best return on investment (up 9 points to 28%).
“The inconsistent pattern across the age groups could be down to the old affordability chestnut,” concludes Mr Beale.