By Ray Lilley
Friday 20th October 2000
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The falling kiwi dollar made AMP Henderson's foreign shares the top performer despite what head of investment strategy Paul Dyer called a turbulent year for markets which included a major technology stocks markdown.
Turbulence was not free-fall, and "old" stocks such as industrials, energy and financial services had improved to help shield the mark-down of high-tech and telco stocks.
While global equity markets declined 5% in the three months to September, the currency revaluation meant returns were up 8.2% in New Zealand dollar terms.
The result was gross returns for its active and global share fund of 9.7% for the September quarter (37% for the year) and for the passive fund 8% for the quarter (35.3% year).
The Low Risk Fund returned 10.6% for the September year, the Medium Risk Fund 15.8% and High Risk Fund 22.1%.
The returns vindicated a diversified mix of foreign and local assets.
"Our long-term strategy decision to have a relatively high level of foreign currency exposure within the balanced fund added significant value this quarter," Mr Dyer said.
"Most local funds do not have high enough foreign currency exposure."
With imported goods making up 30% of New Zealanders' consumption, holding foreign currency was "an asset liability matching exercise."
Up to 50% of portfolio assets should be denominated in foreign currencies.
Foreign currency exposure benefits investors as it is a good partial hedge against the volatility of New Zealand growth assets, and because of the large foreign currency liabilities of most New Zealanders, through consumption.
The group doesn't see the kiwi dollar as being significantly undervalued, and expects it to stabilise in the US40-50c range.
It was correcting after a long period of over-valuation, and should not return to the US60c plus values of the past.
Mr Dyer said a surprise feature of the quarter was the good performance of most New Zealand companies, with Telecom's re-rating dragging down the market.
The economy would have to recover from its major adjustment before offshore investors will look at buying equities.
He would be surprised if the economy weakened much more, given its strong stimulatory monetary settings and the growth being marked up by trading partners.
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