News

Covid-19 rattles investor confidence

Sunday 7th of June 2020

The bank's latest update showed investor confidence at a four-year low in the first quarter of this year.

In the three months to March, overall investor confidence fell from a net +11% to a net +4%.

That is the lowest level since the first quarter of 2016.

ASB senior economist Chris Tennent-Brown was unsurprised.

“Big drops in the sharemarket are enough to rattle investors, and in March investors were also experiencing the economic shock first-hand as we went into lockdown,” he said.

“While we don’t have the full second quarter’s data yet, we can see that sentiment remained very negative in April, even while markets were starting to recover. We know from our conversations with customers that investors are worried about the longer-term repercussions of Covid-19 on investments.

“What’s interesting right now is that sharemarkets are back near their February peaks, but we are expecting some pretty tough economic news over the coming months, so there is a mixture of influences on the mood of investors right now.”

Confidence in Auckland remained unchanged this quarter, with net +6% of respondents expecting return on their investments to improve in the coming year. In comparison, confidence across the rest of the country fell from +14% to just +2%.

Investors' own homes were rated as likely to provide the best return.

Investors’ view of KiwiSaver as being the best bank product for investment returns lifted to a more than five-year high on the back of a record 2019.

Its attractiveness had not slumped this quarter despite volatility as Covid-19 panic swept the markets.

“Over the first half of the quarter, KiwiSaver and any other investment that had significant exposure to the sharemarkets were probably looking very good, and that clearly influenced the mood early on.

“2019 was the best year on record for KiwiSaver returns, and people would have been very pleased with what they saw in things like their quarterly investment statements, or annual returns for 2019.

“Similarly, many people checking their KiwiSaver balances right up until mid-February would likely have seen their investment had been going very well. That rosy state changed during March as sharemarkets slumped and investment valuations took a hit,” Tennent-Brown said.

“We expect investors to remain cautious over the coming months, given the big market movements we’ve seen and the uncertainty that still clouds the outlook.

“What’s pleasing for ASB is that most people have stuck with their investment strategies. We did see a pick-up in fund-switching in March, but most people have stuck with their long-term plans and stayed put in their chosen funds.

“ASB Securities has also seen a high volume of transactions in the local sharemarket – while in March we saw a lot of panic selling, over April and May we have also seen many people wanting to invest.”

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