KEY POINTS:
The level of confidence felt by wealthy New Zealand investors has plummeted in the past three months and is not expected to improve any time soon.
A quarterly survey by ING has found investor sentiment dropped from a score of 96 out of 200 in September to 62
in December last year.
The fall pushes New Zealand from fourth most confident out of 13 countries in the Asia Pacific region to eighth and puts the country's score into pessimistic territory for the first time since the survey started in 2007.
ING chief investment officer Phillip Houghton-Brown said the big drop reflected market conditions during the September/October period.
"It has been one of the most extreme periods in financial markets in history. It's not surprising that investor confidence has dropped - it has happened in New Zealand, Australia and around the world."
The survey also found 45 per cent of investors expect the economy to worsen in the first quarter of 2009.
In the September quarter 43 per cent had expected the economy to improve before the end of 2008 - that has now reduced to 27 per cent.
Houghton-Brown said he did not expect investor confidence to improve much before the next survey in March.
"There has been a lot of stimulus packages from governments around the world to try and stabilise conditions. But conditions are going to remain very difficult for some time to come."
But there were improvements in sentiment in some areas. The outlook on inflation was better, with only 43 per cent stating that it had a significant impact on their decisions, down from 62 per cent in September. Nearly a third also believe the new Government will have a favourable impact on their investments, double the figure recorded in the September quarter, before the election, although 56 per cent believe the Government will have no effect.
The survey found 75 per cent of investors were holding cash or deposits in December and 30 per cent said they planned to invest more in cash.
Only 23 per cent were invested in locally listed companies and just 8 per cent planned to invest more in the sharemarket in the first three months of this year.
Of the 13 countries surveyed, only three - China, Taiwan and Korea - did not see a drop in investor confidence during the quarter. Indonesia was the most confident in the region. Those surveyed have disposable assets or investments of US$100,000 and above.
CRISIS OF CONFIDENCE
Investor confidence rankings for the Asia Pacific Region
1st - Indonesia
2nd - China
3rd - The Philippines
4th equal - India
4th equal - Taiwan
5th - Korea
6th - Australia
7th - Malaysia
8th equal - Hong Kong
8th equal - New Zealand
9th - Thailand
10th - Singapore
11th - Japan