FINANCE

Investors shrug off Europe worries and dig in for the long haul

Tuesday 14 February 2012, 2:18PM
By ASB
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· ASB Investor Confidence Index steady amid Eurozone woes and low interest rates
· Investors continue to show faith in Term Deposits
· Bank Savings Accounts trend down while gradual recovery of Shares continues

Investor confidence has shown ongoing resilience, declining only marginally amid the gloom of the Eurozone crisis and continued low interest rates, according to the latest quarterly ASB Investor Confidence Survey.

The ASB Investor Confidence Index shows that confidence has dropped one point to a net 5 percent. “During the three months to January we saw the threat of crisis in the Eurozone intensifying, while the Reserve Bank in New Zealand maintained the OCR at historical lows,” says ASB Head of Private Banking and Wealth Management, Jonathan Beale. “Investors now appear to be resigned to the reality of a low interest rate environment which could stretch into next year and beyond and are adjusting their expectations accordingly. Our survey results indicate they could be digging in for a longer-than-expected period of low rates at home, combined with subdued growth from Europe.”

However, confidence is up sharply in Canterbury - jumping from net 1 percent to a net 12 percent. “Renewed confidence in Canterbury as the region looks ahead to the recovery phase is almost certainly lifting the result for the rest of the country. An 11 percent jump is significant, and shows that sentiment in the region is recovering after taking an unsurprising dive following the February 2011 earthquake. The Christchurch rebuild will add a confidence injection, so Cantabrians will enjoy a further boost once reconstruction begins in earnest.”

Term Deposits remain the most popular investment class for the seventh consecutive quarter, with 19 percent of respondents believing they will give the best returns, up one percent from last quarter.

Rental Property remains in second place, lifting by one point to 14 percent. KiwiSaver dropped 2 points to 11 percent, with Public Shares, Bank Savings Accounts and Managed Investments all equal at 9 percent.

“All of our investment classes stayed fairly steady this quarter, but trends over the past two years tell an interesting story,” Mr Beale says. “Since Q3 2010 Shares have been creeping upwards in popularity from 5 percent to 9 percent, as the investment that gives the best returns. Meanwhile Bank Savings Accounts have slowly dropped since the start of 2010 from 14 percent to 9 percent.

“Both of these trends are set against a period of low interest rates – indicating investors are perhaps looking beyond Bank Savings Accounts to investments that offer higher potential returns in a low interest market,” he says.