Investor confidence on the rise

7 February 2011

 Investor confidence on the rise

• Investor confidence climbs as a tough 2010 draws to a close
• Term Deposits remain most popular investment vehicle
• KiwiSaver reaches record high in popularity 

Investor confidence has started to rise again as the slow grind of economic recovery continues, according to the latest ASB Investor Confidence Survey.

During the three months to 31 December 2010, the number of investors expecting their investment returns to improve climbed a net 4 percent to 19 percent. 

ASB Head of Private Banking and Wealth Management, Jonathan Beale, says investor confidence is on the rise for the first time in a year.

“There is no doubt that the economy went through a flat patch in the middle of 2010. Investors have been jaded by the slow recovery, but confidence looks to have turned a corner again as the looming spectre of a double-dip recession fades.”

Term deposits return to earlier highs

Term Deposits remain the most popular investment class, with 21 percent of investors believing they offer the best rate of return, an increase of 1 percent on the previous quarter. 

“Term Deposits are back to their highest level of popularity, last achieved in Q3 2008. However, when we looked at a breakdown of the data by month, there was a definite dip in Term Deposit sentiment in December, down markedly from 23 to 16 percent. Investors are likely to have been influenced by the December Reserve Bank announcement cautioning a slowdown on interest rate rises, which they again repeated in January,” says Mr Beale.

Kiwis cling to rental property

Rental property remained in second spot at 14 percent as the investment type that offers the best returns. Bank Savings Accounts dropped 2 points to 12 percent, followed by KiwiSaver at 11 percent, Managed Funds on 9 percent and Shares at 6 percent. 

“The results show that old habits die hard when it comes to rental property,” Mr Beale says. “Even though rentals slipped steadily in popularity following the giddy heights reached before the recession, Rental Property remains a firm second when it comes to views on best investment returns. This resilience prevailed despite falling turnover and house prices over 2010. But the gap is closing on other investment classes, perhaps signalling a longer term decline in investor sentiment.  Only time will tell.” 

KiwiSaver continues its steady climb

“An interesting finding for Q4 were the record results for KiwiSaver,” Mr Beale says.  “For the first time KiwiSaver jumped ahead of Managed Investments and Shares as the investment offering best returns. In addition a record 61 percent of respondents indicated that KiwiSaver would be their primary means of retirement, a percentage which has steadily increased in recent quarters.” 

The expectation that KiwiSaver alone would be enough to retire on was higher among those aged under 50 years. A total of 22 percent of 18-49 year olds felt KiwiSaver would be enough for retirement, up five percent from last quarter, compared to 12 percent for those aged 50 years and over (also up 5 percent).

“It’s very encouraging to see those aged under 50 being so positive about their prospects with KiwiSaver, as this age group needs to start saving now to ensure they  build up a sufficient nest egg for their retirement,” Mr Beale says. “KiwiSaver will be an important contributor to the future wealth of our country, so it is heartening to see this positive attitude.”
 

ENDS