Investor outlook hit by term deposit rate falls
New Zealand investors have lost confidence about the likelihood of seeing increasing returns, with their expectations of term deposits contributing to a recent decline, according to ASB.
The latest ASB investor confidence report found that net investor confidence – the difference between those who thought return on investment would improve in the next year and those who thought it would get worse – fell from 21 per cent to 16 per cent in the three months to June.
It’s a continuation of a downward trend that the bank has noticed since the start of 2017, though sentiment is far higher than the low of 3 per cent witnessed at the start of 2016.
The majority of investors were still positive about likely returns. Twenty-seven per cent expected returns from their investments to increase in the next 12 months, while 40 per cent expected them to stay the same, and 12 per cent thought returns from their investments would decrease.
‘‘Investor confidence has eased off the peak at the start of the year, but remains well above the levels of a couple of years ago,’’ ASB senior wealth economist Chris Tennent-Brown said.
Housing continued to be seen as a good investment.
The bank’s recent housing confidence survey found investment in a family home was regarded as the best money maker, with 23 per cent of respondents considering it the best option. Rental homes were also regarded positively, with 18 per cent rating it the option with the highest returns.
Term deposit expectations took a small dive over the past three months, according to the bank – from 13 per cent who reported it as the best investment, to 9 per cent.
‘‘Expectations regarding term deposit returns eased, which makes sense given how low term deposit returns have been,’’ TennentBrown said.
Term deposit rates have been between 2 per cent and 4 per cent.
‘‘It continues to be disappointing to see quite low expectations regarding KiwiSaver and managed funds relative to term deposits.’’
He said because the survey took place before the recent trims to some bank interest rates, and before the Reserve Bank’s most recent interest rate announcement, there could be weaker investor confidence over the next three months.