Equities more attractive as global economy troughs

Tuesday 28th April 2009

Equity markets look significantly more attractive than cash or bonds, according to AMP Capital Investors, which manages around $11 billion in New Zealand and has boosted its stock holdings at the expense of fixed income and property.

The investment fund manager said global economic activity is no longer in a downward spiral as measures taken by policy makers around the world begin to gain traction. It has gradually increased its exposure to sharemarkets due to the uncertainty of the currency economic climate. Equities performed poorly for the fund manager over the past year, with returns from global hedged stock investments dropping 11% and New Zealand active equities falling 3% as at March 31.

“For the very first time in a long time we are seeing some upward revisions to global growth estimates and risk assets such as equities are responding positively,” said head of investment strategy Jason Wong. “If not for the economic conditions, we’d be maxing out” our equity portfolio, he said.

AMP Capital pushed its equity holdings above the 50% benchmark weighting in the first quarter of 2009 as fixed interest securities slipped below the 40% level. The Dow Jones Industrial Average has slumped 38% year-to-date, while the NZX 50 Index has fallen around 4% in the same period. The International Monetary Fund predicts the global economy will probably shrink 1.3% this year, the deepest slide since World War II.

“The IMF probably overshot” in its forecast, Wong said. But it will probably “be a hard economic environment for the next couple of years.”

The company took advantage of several capital raisings on the NZX, increasing its holdings in Freightways, Nuplex Industries and Fletcher Building, said Guy Eliffe, head of equities.

“Better quality companies raised capital” before other companies did so, he said. “The pricing was attractive.”

Capital raised in the first quarter was $1.4 billion, a record for that period, up 67% from a year earlier with $141 million in equity sales and $1.2 billion of new debt.

Property for Industry, the investment group managed by AMP, posted a net loss of $31.9 million in February after lowering the value of its portfolio by 10%.

Businesswire.co.nz

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