Investor confidence steady despite Covid-19 volatility

Investor confidence steady despite Covid-19 volatility

Venkat Raman
Auckland, June 28, 2020

FMA Chief Executive Rob Everett (Picture Supplied

Contrary to public perception and opinions expressed by some politicians, investor confidence in New Zealand remains steady, according to the annual Investor Confidence Survey,

The Study, commissioned by the Financial Markets Authority (FMA) was conducted by Buzz Channel between May 5 and 14, 2020 during Covid-19 Level 3 lockdown.

The Survey had 1003 respondents weighted by age, gender, region, and ethnicity to ensure that results are representative of the New Zealand population.

Perception of confidence

The margin of error on this sample is  +/-3% at the 95% confidence level.

The Survey found that 66% of the respondents were confident in New Zealand’s financial markets, in line, marginally higher compared to 65% the Survey conducted in 2019.

The proportion of investors saying that they did not know about confidence in the markets shrank to 8% (from 15% in 2019) indicating that New Zealanders are taking more interest to form a view.

The proportion of investors very confident is now at an eight-year high of 10%.

“While overall investor confidence held up, those who were not very confident has risen from 16% to 22%. Of these people, four in ten said that Covid-19 was the main reason for their lack of confidence,” the Survey said.

Noting that investors were better informed this year, the study revealed a strong increase in the proportion of investors who are confident that markets are effectively regulated, rising from 60% last year to 68% in 2020.

Rising popularity of KiwiSaver

The rise in confidence in effective regulation has been driven by a steep increase in confidence levels among KiwiSaver investors over the last two years, up from 56% in 2018 to 67% in 2020.

FMA Chief Executive Rob Everett said, “It is pleasing to see confidence remaining steady over the past 12 months given the market conditions. Further, the level of confidence in regulation shows people are reassured that New Zealand is a good place to invest their money, and that there are protections for investors.”

For those who increased their investments in the past year, buying shares or managed funds were the most popular. Confidence scores across the survey are highest among those with these investment types.

According to the FMA Study, about eight out of ten New Zealanders aged 18 or over had some form of investment in 2020, a consistent finding over the past three years of research.

This equates to 3.2 million people in 2020.

KiwiSaver accounted for 35% of the investments although for about a third of New Zealand investors, that was the only form of investment.

Such exclusive investors are typically younger with half aged under 40. They are significantly more likely than average to identify as Māori (19%) or Pacific Peoples (12%). There is a high incidence of children in the household (44%) and the majority are employed; just 4% are retired, significantly lower than average (19%).

The investor landscape

“The investor landscape is fairly steady when it comes to uptake of the most common forms of investment, although there have been significant shifts among less common investments, with the proportions holding residential property investments or ‘other’ superannuation schemes falling significantly (to 9% and 8% respectively in 2020) and the proportions holding personally-bought bonds or taking part in peer-to-peer lending both doubling in 2020 (rising to 6% and 4% respectively),” the Survey said.

Those in the non-investor group are older with 22% aged 70 or over compared to 14% of the sample population (average) overall.

Their household income is significantly lower than average: over half (52%) report an annual household income of under $50,000. They are also more likely than average to be divorced, separated or widowed (27% vs 13% on average) and twice as likely as average to identify as older, single and living alone (24%).

Need to know high

The Survey found evidence that people are generally taking more interest in and becoming better informed on the country’s financial markets and hence are more likely to have an opinion on the markets. While the proportion of ‘not very confident’ increased significantly in 2020 (up 6 percentage points on the result for 2019 to reach 22%), the proportions ‘fairly’ or ‘very’ confident saw little change (and in fact the latter was at an eight-year, record high of 10% following yearly growth since 2016).

“So, the increase in those ‘not very confident’ was not at the expense of those confident, but rather a result of more people having an opinion and fewer selecting ‘don’t know’. It is also worth considering that the slight fall in confidence was driven by investors being significantly more likely to state that they were ‘not very confident’, although two-thirds still identify as confident, similar to in 2019. Among non-investors, confidence actually rose slightly in 2020: nearly half identify as confident compared to 38% in 2019,” the Survey said.

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