7 Jul 2021

Financial Markets Authority survey: 4% lift in investor confidence

1:57 pm on 7 July 2021

A strong rebound in capital markets and the country's containment of Covid-19 has lifted investor confidence in the past year.

New Zealand's sharemarket has immediately fallen two percent after opening after the Waitangi Day closure. Global markets have been left reeling in the biggest one-day fall on Wall Street since 2011.

While nearly three-quarters of investors had confidence in the capital markets, only 40 percent of non-investors were confident, the survey showed. Photo: RNZ / Rebekah Parsons-King

The Financial Markets Authority's (FMA) annual investor survey shows faith in financial markets increased from 66 percent in 2020 to 70 percent in 2021.

The proportion of people with investments was largely unchanged.

But the data suggested investors took advantage of the economic backdrop of the pandemic, such as a low interest rates and a strong sharemarket, and increased their current investments or made new ones in response to low interest rates and a strong sharemarket.

Term deposits fell from 30 percent to 28 percent, while share trading rose from 20 percent to 21 percent and residential property investments increased by two points.

FMA chief executive Rob Everett said "Term deposits have tended to be the most prevalent investment product outside KiwiSaver, but in this low interest rate environment, with changing behaviours and preferences, individuals' shares are closing the gap".

That was supported by the uptake of retail investment platforms, which now account for 60 percent of all share trading, Everett said.

However, the number of people who reduced their investment increased over the past year from 6 percent to 9 percent.

Everett said that occurred at the margins and was likely the result of individuals and families who felt the economic pressure of the lockdowns.

Non-investors to be targeted

One of the key areas of focus for the FMA was to improve the public's confidence, and hopefully their engagement with capital markets, through effective regulatory activity.

While nearly three-quarters of investors had confidence in the country's capital markets, that number fell to just 40 percent for non-investors.

"There's still a big gap between people who are already in and aware of what is happening and people sat on the sidelines," Everett said.

There was an opportunity for the FMA to pour more resources into reaching people who are wary of investing and raise their confidence, he said.

Part of the challenge, however, would be reaching people from diverse communities.

"There are some language barriers there but I think it is an important place for us to focus given then increased involvement of people in this market who haven't been in [it] before."

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