Investors fleeing risk for safe havens - survey

[muppet]

Investors fleeing risk for safe havens - survey

1:00PM Tuesday Jan 27, 2009





KiwiSaverASB Bank's survey of investor confidence in the December quarter found net confidence slumped to its worst ever level in one of the most volatile quarters in investing history.



The net confidence level, the difference between those positive and negative about the future, plunged to negative 20 per cent from positive 3 per cent in the September quarter.
This was the record low level since the survey began in December quarter of 1998 with its previous low of negative 11 per cent.
The survey found investors preferred bank savings accounts and term deposit accounts to rental property for the second quarter running, breaking a trend of property being the favourite investment choice since 2002.
In the December quarter 18 per cent of investors preferred term deposits, down from 21 per cent in September quarter, while 16 per cent preferred bank savings accounts, unchanged from September.
The proportion who preferred rental property was unchanged at 15 per cent, while the proportion preferring unit trusts and managed funds was unchanged at 10 per cent. Confidence in shares was unchanged at 7 per cent. Confidence in Kiwisaver rose to 6 per cent from 5 per cent.

"This consolidation for term and bank deposits in the fourth quarter may have been cemented because of the retail deposit guarantee scheme", said ASB's Head of Investment Services Jonathan Beale.

"Investors have had a bumpy ride and may be prepared to forsake higher possible returns in some of the more volatile investments in favour of a good night's sleep and a more modest but reliable return," Beale said.
"The attitudes toward shares and managed investments were surprisingly resilient given the turmoil that took place in global share markets over the quarter," he added.
"Despite investor confidence being at the lowest it's been in a decade, hitting the panic button should be avoided for long term investors."
- INTEREST.CO.NZ

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10553778

[donna]

I recall John Key saying he wanted to use KiwiSaver to fund infrastructure and other NZ based projects - and someone else said they thought Kiwisaver needed to go where the best return for the investor is gained not into Government spending.

I am surprised the Govt could tamper with Kiwisaver $$ - and I'm not sure it should be able to go anywhere near it...umm but maybe it is only their contribution? If so - that should not be allowed either IMHO.

Cheers,

Donna

[Orkibi]

The survey found investors preferred bank savings accounts and term deposit accounts to rental property for the second quarter running,

If you think about it anyone with cash who need his funds to generate some income (not Gold) has nowhere to putt it those days.

property is going to be attractive again when one can get 6%-7% net yield.

The proportion who preferred rental property was unchanged at 15 per cent

there is already competition on good high yield properties, people are paying current market value for them. (not taking in account any further drop)

It won't take long for people to understand that property is where the money is, IF YOU BUY WELL.

[donna]

It want take long for people to understand that property is where the money is, IF YOU BUY WELL.

Yep - though we don't want too much competition aye!

cheers,

donna

[jporteous]

Net Yield?

...when one can get 6%-7% net yield.

Hi Orkibi

Yield is rental as % of asset value. Just curious how do you calculate net yield?

Thanks Jono

[Orkibi]

In related for where people will place the deposit, buying a property with 100% cash for the returns. oppose to term deposit.

Net yields is= Income - cost / purchase prise.
I was referring for sort of cash on cash return for those who buy without borrowing.

you will be surprise how many people are parking there cash in property.
obviously not thinking about leverage effect.

[Gibber]

I recall John Key saying he wanted to use KiwiSaver to fund infrastructure and other NZ based projects - and someone else said they thought Kiwisaver needed to go where the best return for the investor is gained not into Government spending.

I am surprised the Govt could tamper with Kiwisaver $$ - and I'm not sure it should be able to go anywhere near it...umm but maybe it is only their contribution? If so - that should not be allowed either IMHO.

Cheers,

Donna

Donna,
he can (and probably will) tamper with the Cullen fund. The fund that was set up to fund National Super from about 2020 on. Both the Cullen fund and Kiwisaver are aimed to increase the amount of funds retired kiwis get. The difference is that with Kiwisaver the money is in an account in your name. The more you put in the more you should (barring GFCs) get back. National Super is defined benefit regardless of how much tax you pay. Every single NZ National Superannuitant gets the same as every other single NZ National Superannuitant. Every NZ National Superannuitant Couple, well, I'm pretty sure you can join the dots...

In the main, Kiwisaver funds are locked up until you retire or buy your first house. But they are your funds, in your name. So for National to direct where Kiwisaver funds get invested would face a fight. If you choose growth allocation and National comes along and re-directs into Infrastructure, you might get upset. Bit harder with the Cullen fund as its aim is to prop up National Super. And there will be less emotional attachment to where the funds go.

The Cullen fund has no funds earmarked for individual contributors. And politicians could probably spin some line that by investing in NZ 'blah blah blah patriotic rant here blah blah disguise smuggling money to lobbyists blah blah blah'. Rather than having a hands off approach to the investments as is the current situation with the Cullen Fund.

Cullen fund will be easier for the politicians to interfere with in terms of directing where the funds are to be invested. National has already taken the pruning knife to Kiwisaver so there are going to be less funds from Kiwisaver anyway in the near to medium term. The Cullen Fund is one lolly jar I believe it will be very hard for the politicians to keep their hands out of, given the situation they find themselves faced with. I would be betting at better than 90% chance the pollies will direct where the Cullen Fund is to invest.

Edit: Updated to make difference between Cullen fund and Kiwisaver a bit clearer and updated last paragraph

[SmallBrain]

John Key did say before the election that National would consider mandating the Super/Cullen fund to invest up to 40% within NZ.

As Gibber said, KiwiSaver is completely different and the NZ Govt has no direct influence on how each account is invested.

Edit: More important is that the NZ Govt should stop contributing to the Super/Cullen fund given the projected fiscal deficit for many years to come. There is simply no point to borrow in order to keep contributing to the Super/Cullen fund.