Kiwi investors flock to safety of banks

Flighty Kiwi investors spooked by the storm clouds over Europe are increasingly taking refuge in the safety of banks.

ASB's latest Investor Confidence Index slipped four points over the three months to the end of June, and investor sentiment at one point hit a three-year low.

One in five respondents to the survey thought bank deposits, which typically offer between 3 per cent and 5.5 per cent interest, gave the best investment return.

Latest Reserve Bank statistics show New Zealanders are flocking to perceived safe havens, with an 8.7 per cent annual increase in term deposits to $108 billion.

The index showed the appeal of rental property dropped back beneath term deposits, from 19 per cent last quarter to 17 per cent.

Only in Auckland did property investment continue to reign supreme, where almost a quarter of respondents (24 per cent) thought it was the best choice.

“We appear to be climbing back to the dizzy days of Auckland's property love affair,” said ASB head of wealth advisory Jonathan Beale.

The results also suggest that the Government may face a tough sell in its effort to encourage conservative Kiwis back into the stockmarket, which was in last place at 7 per cent.

That meant that shares were even less popular than bank savings accounts, which typically pay a modest 2 per cent to 3 per cent interest rate.

Beale said the uncertainty in Europe appeared to have reignited a “flock to caution” among investors.

“In June alone, investor confidence plunged 12 points to hit zero, the lowest level in three years.”

Over the whole quarter, the difference between the “better” and “worse” responses to the survey was 8 per cent, down four points.

Beale said although the situation in Greece had stabilised, concerns about Spanish debt levels continued to rise.

“Investors appear to have taken this news to heart, with more believing returns will worsen over the next 12 months.”

Canterbury bucked the negative sentiment trend, with confidence lifting six points as signs of the rebuild became tangible.

Meanwhile, managed funds were ranked fourth best at 10 per cent, and KiwiSaver rated third overall at 12 per cent.

“We saw a sharp spike in the popularity of KiwiSaver among those aged over 60 years, from 8 per cent to 18 per cent,” said Beale.

“Eligible investors would have been able to access their funds for the first time on July 1, shortly after the survey period, potentially increasing their confidence in KiwiSaver returns.”

The ASB Investor Confidence Index is based on 780 online interviews with adults throughout New Zealand. Fairfax NZ

The Dominion Post