Confidence surges close to record levels

By JIM EAGLES

Investor confidence in New Zealand has shrugged off concerns about a global downturn and is now at near-record levels.

And it seems Don Brash, who stepped down on Friday as Governor of the Reserve Bank, deserves the credit.

The ASB Bank Investor Confidence Survey for the first quarter of the year, released today, has recorded its biggest jump.

From a net 4 per cent of respondents at the end of last year expecting investment returns to worsen - in the wake of the September 11 terrorist attacks and the subsequent global economic slowdown - a net 19 per cent of respondents now expect returns to improve.

That 23 percentage point jump is the biggest in the history of the index and the 19 per cent net confidence level is second only to the 21 per cent recorded in the first quarter of 2000.

ASB investments chief manager Roger Perry said the sharp turnaround in confidence had largely been driven by rising interest rates.

Perry said the Reserve Bank's two increases in the official cash rate had been "a key factor causing investors in term deposits to improve their perceptions of future prospects."

The recovery in the housing market had also been an important contributor, he said, although the survey did not point to greater interest in residential rental property as an investment.

Direct investors in the sharemarket were the most optimistic group, with a net 50 per cent expecting better returns over the next year.

Perry said the bank's feedback from the market indicated that for most investors there was still a preference for holding cash investments, with small investors in particular waiting for evidence of a sustained improvement in returns before investing.

"In contrast, large investors have been steadily re-entering managed funds and share markets since the dip following September 11."

Respondents believed managed funds would give the best return in the year ahead.

Enthusiasm for term deposits and direct share investments rose slightly; interest in residential rental property fell a little.