Kiwi investors cautious as regional sentiment rebounds

Wednesday 15th July 2009

New Zealand and Japanese investors are the most pessimistic in the Asian region, with sentiment among investors in other countries bouncing back strongly in the second quarter of 2009.

Overall, the index jumped 55% into the "optimistic" range at 132 points, the largest recorded movement in the index since it began in Q3 2007, based on expectations that Asian economies will recover more quickly than Western Europe and the US.

While described as a pan-Asian index, ING excludes the huge Japanese economy on the grounds that its consistent pessimism would distort the pattern for the region as a whole. Japan's score improved to 99 in Q2, compared with 55 in the Q1 survey.

New Zealand investor sentiment scored at 84 in Q2, taking it into "neutral" territory, and ING's New Zealand investment strategist Suart Millar suggests that Kiwis' relative caution may be justified.

"While Asian economies have benefited from continued growth in China and India, it will be difficult for global equity markets to advance strongly while economic growth in the developed world is continuing to contract," he said.

"Markets have been quick to price in the end of the global recession and the risk is that Asian investors become too optimistic too early."

The survey found Australian investors bouncing back from an even gloomier view of the world than New Zealanders at the start of the year, with a score of 116 "bordering on optimistic", ING said.

The more detailed ING results in New Zealand were consistent with other recent surveys indcating the economy bottoming out and slowly returning to growth. There was a general improvement in expectations for the next six months, and a slowing in the numbers experiencing or expecting worse personal circumstances.

Cash and deposits were the most popular vehicles for New Zealand investors at present, while residential property that was not self-occupied dived from 63% to 42% favourability between the first and second quarters.

"While there have been some early signs that the pace of economic contraction is slowing, investors will need evidence that this will lead to real economic activity and that the earnings recession is coming to an end before committing themselves more fully to growth assets," said Millar.

Businesswire.co.nz

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