NZ financial market participants remain in a marginal risk-on mood despite a record run-up in prices, a new Harbour Asset Management survey has found.
The inaugural Harbour survey found 40 per cent of the 80 respondents would recommend adding riskier assets to portfolios with the remainder almost equally split between doing nothing and pulling back.
But the study highlights a wide divergence in risk attitudes among the five underlying sub-groups in the survey, covering investors, consultants, banks, brokers and others.
About 60 per cent of respondents from the investor and other categories would recommend adding risk categories, the survey found.
“Views elsewhere, however, were much more balanced and perhaps reflected the recent strong rebound in risk-sensitive assets,” the Harbour report says.
Bank-based respondents proved the most-bearish with roughly 30 per cent willing to add risk assets while investment consultants were most inclined to ‘do nothing’ (about 50 per cent).
“Global equities, for example, are more than 40% higher than their 23 March low, and 5% below all-time highs,” the Harbour study says. “Strongest views were found in the broker community with only 6% recommending no change.”
In fact, brokers were the least keen to add risk assets (almost 50 per cent), although almost the same proportion reported the opposite inclination.
“In Harbour’s multi-asset portfolios, we have a similarly balanced view and recently trimmed our equity overweight given the sharp recovery in equity prices,” the report says. “However, we still retain a small growth overweight as equities continue to offer a good risk premium over bonds and are around fair value using normalised price to earnings measures.”
The survey also found further outbreaks of COVID-19 ranked as the greatest risk to markets over the next six months, cited by 40 per cent of respondents, overall. However, more than 60 per cent of investment consultants and others rated a coronavirus second-wave as the biggest risk, reflecting some divergence of views among sectors.
More than 40 per cent of bank respondents put ‘disappointing’ economic growth as the key medium-term risk, the only category in the survey to place it above a COVID-19 second-wave.
Across all groups, almost 30 per cent ranked poor economic growth as the greatest threat over the next six months while less than 10 per cent cited financial market stress as a looming danger.
The study, authored by Harbour fixed income strategist Hamish Pepper, also tapped market views on currency and mortgages.
“Most survey respondents felt it was a good time to fix New Zealand mortgages,” the report says. “It is difficult, however, to know whether this reflects the historically low level of mortgage rates, or expectations that short-term interest rates are likely to increase.”
Banks “provided the gloomiest outlook”, the survey says, while “investors and consultants were generally more positive”.