2014.5.10
Reuters
Leading CEOs take part in a panel discussion of Credit Markets: What's Next? during the 2014 Milken Institute Global Conference in Beverly Hills, California
Shares are starting to find favour again among global investors, after taking a hammering during the global financial crisis (GFC).
After global share markets tanked during the crisis, many investors retreated to more conservative investment options like cash or bonds. Now, as the global economy starts showing signs of renewed life, investors are once again becoming more adventurous with their money.
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According to the 2014 Schroders Global Investment Trend Report (an annual survey of more than 15,000 investors from 23 countries) equities are finding favour, as investors see 2014 as the year of returning growth opportunities.
The report found that on average 70 per cent of global investors believe equities will be the highest performing asset class over the next 12 months - which isn't surprising given the strong performance shares put in at the tail end of last year.
Massimo Tosato, executive vice chairman of Schroders said investors heading back into shares need to take a long term approach.
"Opportunities for growth and income are out there but it's still going to be a slightly bumpy ride."
The little market that could
New Zealand is a bit player on the global equities scene, but our market has performed strongly so far this year. AMP Capital's Investment Briefs report shows that the New Zealand share market outperformed its global counterparts in the first quarter of 2014.
Global equity markets gained one per cent in the March quarter, and 0.02 per cent for the month, compared to a 8.5 per cent quarterly gain and a three per cent monthly gain in the New Zealand share market.
"The domestic equity market has now returned three consecutive months of positive returns since
the start of the year, a feat not achieved by many global peers," AMP Capital said.
Cash no longer king
Fear of missing out (FOMO) could be a motivating factor for investors, who don't want to miss out as markets revive.
BNZ chief economist Tony Alexander said in a recent market commentary that the world was "awash with people who eased off their spending in recent years as they built up their savings". He added that investors were becoming increasingly unhappy with low returns on the likes of bonds and bank deposits.
"And their discontent is growing as they see examples of some assets which have yielded tremendous returns - such as property."
Strong outlook
The New Zealand economy is enjoying its strongest growth in a decade, with HSBC going so far as to label it a 'rock star' economy earlier this year.
In a quarterly economic outlook, ASB chief economist Nick Tuffley said he expected growth to hit around 3.5 per cent this year, with two key drivers being construction and agriculture.
The weather has played its part in helping growth, with timely rainfall leading to decent pasture growth and a good start to the year for farmers.
Westpac's latest economic outlook report said dairy prices have been a standout over the past year, with log, meat and wool prices also strengthening. The report said strong consumer demand from an increasingly urbanised China means high prices for New Zealand's export commodities are likely to persist for some time