Investors play safe

Wednesday 29th April 2009

Bank saving accounts ranked as most preferred investment class in the ASB Investor Confidence survey, suggesting job worries and uncertainty about the economy are prompting people to keep their funds close at hand.

A net 21% of investors rated savings accounts as the top investment class in the first quarter, up 5 points from the previous three months and the first time it has led the survey. Rental property held in second position at a net 15%, which probably reflected current low interest rates, ASB said.

"Uncertainty over investment options, job security and the world economy have put people into a wait and see mode," said Jonathan Beale, ASB's head of investment services. That's "making readily accessible money in the bank a clear winner as people play their cards close to their chest,"

Overall investor confidence extended its decline in the first three months of 2009, posting a decade-low reading of -25%, from -20% in the fourth quarter of 2008.

Term deposits tumbled from their top ranking over the past year, relegated to third place, down 5 points to a net 13%. The drop reflects dwindling returns offered by term deposits compared to other investment classes.

Sentiment around shares was little changed, with confidence slipping 1 percentage point to 6%, evidence that equity markets were more stable during the first quarter after tumbling in 2008.

"Overall, the report confirms that investors are in a holding pattern while the markets fluctuate," Beale said. "Results have now rebounded from their negatives earlier in the quarter, with signs of stabilisation in March thanks to the announcements from the US banks."

US lenders including Citigroup posted positive earnings in the first quarter.

The proportion of people who expect KiwiSaver will be enough to support them in their retirement edged up 1 percentage point to 20%, though the number of people who don't think it sufficient remains, the ASB report said.

By Jonathan Underhill

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