Investor confidence hit by volatile quarter

Media release
26 August 2010

Investor confidence hit by volatile quarter

• Investor confidence continues its decline
• Rental property less popular following tax changes
• KiwiSaver hits record high as three year anniversary looms

Investor confidence has continued to decline as markets remain unsettled after a financial quarter marred by the European debt crisis and general volatility, according to figures released today by ASB.

A net 19 percent of investors surveyed expect investment returns to improve over the next year, down four points from a net 23 percent the prior quarter, according to the Q2 2010 ASB Investor Confidence Survey.

ASB Acting General Manager Private Banking and Wealth Management Jonathan Beale says May was a particularly tough month for global markets.

“The European debt crisis has been unsettling for economies around the world, creating significant uncertainty. In addition May’s nine percent ‘flash crash’ of the Dow Jones Industrial Average added to a general feeling of unease.

The run of recent events has left many investors uncertain about the continued pace of the recovery so it is not surprising that investor confidence is dropping from the record highs we saw in the last quarter of 2009. At that time, the only direction from the depths of recession seemed to be up, so now we are probably seeing a return of realism amongst our respondents,” adds Mr Beale.

Tax announcements hit rental property

“The Government’s Budget 2010 changes to tax on property investment have dented the popularity of rental property as an investment vehicle”, Mr Beale says.

“Rental property has reigned supreme over the past year after recovering from a big slump in late 2007 and early 2008. However this quarter, rental property dropped three points to a net 14 percent as the favoured best value investment vehicle.  As such, rental property now sits well behind term deposits, which grew by one percent to 17 percent, and at the same level as bank savings accounts, also at 14 percent.”

Managed funds and shares were both unchanged for the quarter at a net 10 percent and eight percent respectively.
 
KiwiSaver keeps climbing in popularity

Mr Beale says a total of nine percent of respondents now felt that KiwiSaver offered the best rate of return.  “As we near the three year anniversary of KiwiSaver, the superannuation savings scheme is at its highest level of investment popularity since the scheme was launched in 2007.”

Charts can be downloaded here