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Heartland is a New Zealand bank with roots stretching back to 1875 and a proud history of serving communities through respected names such as CBS Canterbury, Southern Cross Building Society, PGG Wrightson Finance and MARAC.
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Investment insight

On-going volatility in global financial markets means many New Zealand investors are paying close attention to how the NZX is performing compared with investment returns on property and traditional bank deposit products.

World events continue to dominate and influence investor sentiment. Recent US/Chinese trade relations and other political uncertainties can cause instability in share markets, resulting in share sales here and internationally.

Calculating your risk

Recent events on the world stage have impacted the New Zealand share market, more than interest rate markets (including bank deposits). Generally, Kiwi investors perceive shares as riskier choices to invest in than cash products, like bank deposits. Research shows only one in five New Zealanders invest in shares.*

Simply put, when faced with uncertainty in the market, investors tend to gravitate towards lower risk investments. They may sell off shares in emerging markets, perceived as high risk, and invest in safer high-rated bonds or bank deposits.

We’ve seen this pattern of ‘de-risking’ in the decade following the Global Financial Crisis. As a result, we continue to experience strong, on-going demand for our deposit products.

The role of the traditional bank deposit

Heartland Bank remains well placed to satisfy customer demand for simple interest rate products, by offering a range of term deposits of up to five years duration. There’s continued demand for simple investment products. Heartland supports this by offering easy-to-understand deposit accounts with highly competitive** interest rates compared with the wider retail bank market.

We’re acutely aware that market uncertainty dictates the type of deposit products Kiwis want to invest in, so we work hard to offer our customers simple products, well- suited to their individual cash flow commitments and risk appetite.

Many investors appear to be in a ‘wait and see’ mode at present, being comfortable to roll investments with less than two years duration at slightly lower interest rates. This behaviour reflects the current wholesale interest rate environment, with the Reserve Bank indicating the OCR*** (Official Cash Rate) is unlikely to change before 2019. Adjustments to the OCR are dependent on wider economic performance in New Zealand and the impact of global events.

Overall investment jigsaw puzzle

Other type of investments, particularly residential property, also play a key role in the overall investment jigsaw puzzle, as does KiwiSaver and the investment fund industry.

While the mix of funds attracted to any one type of investment changes with the economic tide, there’ll always be a steady demand for traditional deposit products like ours.

We continue to provide our customers with a competitive range of products to meet customers’ specific needs in this area.

* https://www.sharesies.nz/ourblog/2018/7/3/kiwis-attitudes-to-investing#/
** www.heartland.co.nz/savings-and-deposits/term-deposits
*** The Official Cash Rate (OCR) is the interest rate which applies to overnight borrowing and lending between banks and the Reserve Bank. It is currently a key operational feature of monetary policy in New Zealand and influences the interest rates banks are able to offer.

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