Investors still gloomy

By Paul McBeth

Thursday 16th April 2009

New Zealand investors are still gloomy about the state of the economy as it heads into the second quarter, while confidence in the pan-Asian region bounced back on optimism among Indian and Chinese investors.

Almost half of kiwi investors believe the economic situation will deteriorate, up from 45% in the last Quarterly ING Investor Dashboard Survey. New Zealand respondents retained a pessimistic outlook as the investor sentiment index gained 8% to 67 out of 200, where a reading of zero is the least optimistic .

The pan-Asian index, which is derived from the median sentiment index scores of markets in China, Hong Kong, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand, improved to 85 taking it out of the pessimistic range of the survey.

"The survey shows us that in New Zealand the market opinion is divided between those who think the economic situation will get worse, and those who think it will either remain the same or improve," said Stuart Millar, investment strategist at ING New Zealand Ltd. "China and India have been key driving economies in Asia and they still maintain growth forecasts for GDP of 7% and 5% respectively."

The survey found almost 40% of New Zealand investors will boost their cash reserves in the second quarter as they look to take a more conservative approach to the global economic downturn. Two thirds of kiwi respondents were confident their employment prospects wouldn't be affected by the current recession, and almost half of those surveyed believed the government response to the downturn had a favourable impact.

"The global financial and economic crisis is not something that China and India, the two growth engines in Asia, can solve alone. Until the US and Europe begin to recover from the crisis, it's best to be cautious," Millar said.

Over half of the New Zealand investors surveyed expected the share-market to fall in the second quarter compared to just over a fifth who thought it would rise. The NZX 50 index has climbed 2% to 2643.16 since the end of the first quarter. It slipped 4.6% to 2590.394 in the first three months of this year.

Inflation is still a major concern among New Zealand investors, with 59% of respondents expecting it to rise in the next quarter, according to the survey. The consumer price index is expected to fall to an annual rate of 3% in the first quarter according to a Reuters survey, taking it back within the target band for the Reserve Bank.

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