FMA: Tell us what you need

The Financial Markets Authority says it is “closely monitoring” the impact of coronavirus on New Zealand’s financial market and is considering all its options to ensure that markets continue to function well.

Friday, March 20th 2020, 6:00AM

Chief executive Rob Everett said it was in close contact with market participants to help understand the pressures they were facing, how they were coping and how they were serving the needs of customers.

He said it was an uncertain time for KiwiSaver members and other investors.

“At this point, we have not found any inappropriate behaviour by KiwiSaver providers and many KiwiSaver members are taking heed of the advice to stick with their long-term investment strategy.

“However, many providers are reporting significantly increased switching activity – mostly from growth or high-growth funds into conservative funds. The FMA urges KiwiSaver investors to consider carefully before switching funds, as they will, on occasion, see major ups and downs in balances.

“Recognising that some people might need the money immediately for a first home, switching funds during market turbulence forces the sale of investments at lower prices and gives up the prospect of gains when those investments start to recover.

“KiwiSaver providers should be providing general (class) advice to members at this time.”

The FMA has also published warnings to consumers about investment scams exploiting market conditions and uncertainty due to the Covid-19 pandemic.

A number of other agencies and overseas regulators were concerned that the anxieties caused by the virus pandemic and related market disruption might make some investors particularly vulnerable to scam artists.

“Do not invest or make purchases following cold calls or online adverts from outfits you cannot verify,” Everett said. “Times like this are ripe for criminals and sophisticated fraudsters to trick people into parting with money or handing over passwords or other identity information.”

Everett said the FMA was considering delays to some of its regulatory work to ease the regulatory burden on market participants to allow full devotion of their resource to helping customers and investors. It was also inviting industry to suggest ways where the regulator could support them at this time.

Meanwhile, Morningstar has issued an economic update for New Zealand.

It said no one could be sure of the final impact of the coronavirus outbreak on the markets in this country, or how long the effects would be felt.

“There is unlikely to be much investor support for risk assets until the worst of the Covid-19 costs are seen to be behind us.”

New Zealand shares have fared just as badly in the global sell-off as other equity markets, and year to date the S&P/NZX50 index is down 15.0% in capital value and down 14.5% in total return terms.

Morningstar said the Government's stimulus package should take some of the potential downside out but the next stage of the “Covid-19 saga” was not clear.

“If some of the more optimistic scenarios come to hand, local equities may have found their feet, but a more-realistic view is that any significant recovery will have to await greater clarity on the global reach and impact of the Covid-19 outbreak.”

Tags: Covid-19 FMA Morningstar