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COVID-19 Fails To Knock Kiwi Investor Confidence, But More Disclosure Wanted

Three months of COVID-19 lockdown and investment turmoil has done little to knock confidence in New Zealand capital markets and listed companies with overall investor sentiment very similar to 2019, an investor survey held in mid June shows.

However, in the wake of the pandemic there is a strong call for additional information in audited financial statements, in particular regarding impacts on operations and results, including long term.

Chartered Accountants Australia and New Zealand’s (CA ANZ’s) latest Investor Confidence Survey reveals around three quarters of New Zealand investors have some or quite a bit of confidence in capital markets and in investing in listed companies, almost unchanged from last year’s survey.

Current confidence is based on a belief that the New Zealand economy will recover well from COVID-19, faith in the NZX’s history of bouncing back and confidence in the government.

The CA ANZ survey comes after an FMA survey held in May also found investors relatively unfazed by the pandemic’s impact on financial markets. In April, the NZX reported a significant increase in trading volumes – up around four-fold since early 2020.

The faith in New Zealand markets is in contrast to investing internationally, with over one third of respondents saying they have very little or no confidence in offshore capital markets.

“This level of investor confidence and buying activity is more than surprising in the face of what the OECD has described as the most severe economic recession in nearly a century,” said Amir Ghandar, CA ANZ’s Reporting and Assurance Leader. “A sense of optimism has clearly been growing as the nation weathered the pandemic, but uncertainty remains as to the speed and depth of an economic recovery.”

Australian investors are similarly confident.

However, Ghandar said investors were not ignoring risk. More than half (53%) are expecting ‘a great deal’ or ‘quite a bit’ of additional disclosure in financial statements in the COVID-19 environment, focusing on operations and results.

“Investors are also interested in the impact on liquidity and business outlook, changes in demand for products and services, the impact of travel restrictions and the impact to employees.

“A reality check may be due later in 2020, with around half of investors saying companies and auditors flagging ‘material uncertainty’ will have a possibly significant impact on their confidence. Auditors and the XRB have both recently pointed to a likely increase in the prevalence of such disclosures in upcoming reports.

Ghandar said he anticipated shareholders will focus on financial reports more than ever this year, giving them a new prominence. “They will still be looking at explanations from Chairs and CEOs, but also probing whether what they’re hearing aligns with the financials in terms of going concern uncertainties, asset carrying values and other assumptions.”

Independent auditors who audit publicly listed companies remain top of the confidence and effectiveness ratings among players with roles helping to advance investor protection.

The full Investor Confidence Survey report will be published later this month.

Detailed survey results

At the current time, how much confidence would you say you have in New Zealand capital markets (i.e. the NZX)?

Great deal of confidence8% 
Quite a bit of confidence28% 
Some confidence47%
Very little confidence14%
No confidence at all3%

For what reasons do you have confidence in New Zealand capital markets?

Belief that the New Zealand economy will recover well post COVID-1955%
Confidence in the economic and political system of capitalism22%
Confidence in the government35%
Confidence in New Zealand's productivity37%
Confidence arising from the upcoming election13% 
The NZX historically bounces back48%
Personal financial situation24%
The unemployment rate is low7%
Government regulation18%
Positive news heard18%
Don't know/no opinion6%

For what reasons do you have little or no confidence in New Zealand capital markets?

Lack of leadership in the government17%
Fear of New Zealand's position internationally34%
Concern about New Zealand's productivity19%
Fears about the impact of COVID-19 and lockdown measures58%
Volatility and instability in the NZX38%
Belief that the economy is not doing well43%
Uncertainty arising from the upcoming election16%
The government's budget position33%
Personal financial situation16%
Government regulation13%
Negative news heard14%
Other (write in)2%
Don't know/no opinion7%

How much confidence would you say you have today investing in New Zealand companies that are publicly listed (e.g. on the NZX)?

Great deal of confidence4%
Quite a bit of confidence31%
Some confidence45%
Very little confidence16%
No confidence at all3%

For what reasons do you have this confidence?

Belief that the New Zealand economy will recover well post COVID-1956%
Confidence about corporate governance in New Zealand29%
The NZX historically bounces back50%
Personal experience16%
Positive news heard about New Zealand companies22%
Less regulation/red tape than previously11%
Confidence in the New Zealand government33%
Other (write in)1%
Don't know/no opinion5%

For what reasons do you have little or no confidence investing in New Zaland companies that are publicly listed?

Only certain people benefit from New Zealand companies doing well17%
Unethical practices5%
Concerns about corporate governance in New Zealand18%
Corporations are too short-term/profit driven16%
Impact of COVID-1967%
Economy is not doing well43%
Negative news heard20%
Personal experience6%
Other (write in)4%
Don't know/no opinion8%

What impact does it have on your level of confidence investing in a publicly listed company where the financial report and auditors' report indicates "material uncertainty" in relation to the company's ability to continue as a "going concern"?

Significant decrease in confidence16% 
Some decrease in confidence31%
No impact on confidence24%
Depends on the nature of the disclosure20%
Not sure what these terms mean8%

Details of the survey

Online survey of 503 NZ respondents using the Dynata panel. Survey conducted 12-23 June 2020. A majority of respondents had investments in Kiwisaver (82%), Savings account in a bank or financial institution (74%), term deposits (51%) and Shares purchased on the stock market (41%)

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