Investors shake off political uncertainty
New Zealanders aren’t letting talk of a market crash dent their investment confidence.
ASB has released its latest survey, which defines investor confidence as the difference between the proportion of people who feel their return on investment will improve over the next year, and those who feel it will get worse.
For the December quarter that reading ticked upwards to a 20 per cent positive, from 19 the quarter before.
Investor confidence increased sharply in the Canterbury region to 29 per cent, an 11 per cent rise, bolstering the national reading.
In the previous three quarters, investors had been becoming more cautious as the election approached. December was the first time that turned around.
ASB senior wealth economist Chris Tennent-Brown said there were several factors influencing sentiment.
‘‘The last quarter of 2017 was an amazing quarter for many investments. The local share market lifted over the quarter and offshore markets were also positive, boosting returns on many growthfocussed funds within KiwiSaver and other managed investments.
‘‘The level of confidence revealed in this survey indicates strong returns can eclipse worries such as those around the political climate.’’
Although there was a lot of commentary that questioned how much higher the share market could go, or raised concerns about asset prices more generally, people appeared to be unfazed, TennentBrown said.
‘‘We’ve been fielding a lot of calls from media, some investors, saying ‘the share market has had a good run, what do you think of this?’
‘This survey shows people expect the same sort of returns going forward as they’ve seen in the past. Hopefully that means they’re taking a fairly long-term approach to their thinking, rather than fretting about it day-by-day.’’
But Tennent-Brown said it was a good time for people to take stock of their investments, make sure they were in funds that were appropriate for their risk profiles, and had well-diversified portfolios.
Respondents were the most confident about the investment returns of their own homes, and rental properties, although that had started to cool.
‘‘A moderation in confidence regarding housing is being seen in Auckland as well as the rest of the country,’’ Tennent-Brown said.
‘‘House prices are high, LVR restrictions have been tweaked but are still restrictive, and the uncertainty of an upcoming tax review all cloud the picture. Changes to the rules that impact foreign property buyers are another area of uncertainty that will be influencing perceptions.’’
The survey shows New Zealanders are still cautious about where they put their money.
Confidence in savings accounts improved, with 11 per cent saying a bank account would give them the best returns, from 6 per cent the previous quarter.
Tennent-Brown said it was surprising how many people still thought term deposits were the best place for their money. All the major investment asset classes had a strong run in the last quarter of 2017, and almost all managed funds would have out-performed term deposits.
But investors seemed to prioritise the predictable option.
‘‘If you think in terms of generating the highest return the New Zealand share market would be standing out, it’s had such a good return last year, and that’s flowed through to many KiwiSaver and managed fund investments. It shows people still want safety and security.’’