Confidence amongst Kiwi investors continues to ease, with expectations around return on investment from term deposits contributing to the decline.
The latest ASB Investor Confidence Report showed nett investor confidence, the difference between those who thought return on investment would improve in the year ahead and those who thought it would get worse, had fallen from +21% to +16% in the three months to June.
This continued a downward trend seen since the start of 2017, although overall sentiment was still significantly higher than the +3% low seen at the start of 2016.
For the second quarter of the year, investor confidence fell in every region across the country, except for Canterbury where it remained steady at 19%.
"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 says.
"Expectations regarding term deposit returns eased, which makes sense given how low term deposit returns have been. The survey took place before the recent trims to some bank rates, and the RBNZ's most recent OCR announcement, so we could see further weakness in this area in the next quarter too," he says.
However, it is important to note the majority of respondents are still positive. Some 27% expected returns from their investments in the next 12 months to increase, and 40% expect returns to stay the same, compared with 12% who thought it would decrease.
Personal homes continue to be viewed as the best investment for providing a good return with 23%, followed by rental properties with 18%, according to the report. Confidence in both categories increased slightly in the quarter.
In comparison, perception of term deposits took a dive, with 9% viewing this as the investment giving the best returns, down from 13% in the previous quarter.
"It continues to be disappointing to see quite low expectations regarding KiwiSaver and managed funds relative to term deposits. It's been an amazing few years for sharemarkets, which is great for share investors, and the sharemarket gains have flowed through to really good returns for a number of growth-focused funds found in KiwiSaver schemes and managed funds. Term deposit rates are between 2% and 4%, whereas a number of KiwiSaver balanced and growth-focused funds will have posted returns far higher than this over the last few years," Tennent-Brown says.
Boost for Canterbury
Investor confidence in Canterbury continues to differ from other regions, and remained flat in the three months to June, rather than dipping as it did elsewhere.
"Canterbury is unique because of the huge influences of the earthquake on people, businesses, as well as the housing market and rental market over the years since the disaster.
ASB's separate Housing Confidence Survey shows that in the second quarter Canterbury was the only region where the majority of respondents think it’s a good time to buy.
Canterbury house price expectations within that survey are the highest level since April 2017, and this could be what’s also supported investor confidence in the region over the past quarter," Tennent-Brown says.
Further investor commentary from Chris Tennent-Brown can be accessed below.