Tuesday 22nd July 2003
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This strong result can be attributed to concerns that hung over the markets earlier in the year receding, and the willingness of policy makers around the world to lower interest rates and hold them low to stimulate growth.
Domestic shares continued their steady performance and delivered a solid 15.2%. Global equities rebounded from discounted levels and delivered 17.8% on a currency hedged basis and 9.3% on an unhedged basis, says AMP Henderson Global Investors.
'The return on hedged global shares was much better as a result of the continued climb of the New Zealand dollar which increased 5.9% against the US dollar over the quarter' said Paul Dyer, AMP Henderson's Chief Investment Officer.
Global fixed interest and New Zealand fixed interest assets returned 3.7% and 4.0% respectively, benefiting from the falls in long-term interest rates.
'While deflationary risks are clearly a global concern we believe the risks are overstated and that the low interest rate sentiment has probably peaked. Bonds have had a great run over the last twelve months but this is unlikely to continue.
'During the quarter we became concerned about the extremely low level of global fixed interest rates. As a result we almost entirely sold out of these markets. In most regions we have now started buying back into these markets as yields have been rising.
'The New Zealand dollar has risen steadily over the last two years. However, there are indications that the rise may be coming to an end. The currency is now slightly above most valuation ranges.
'The past two weeks have seen increased volatility in both the New Zealand dollar and other commodity currencies. This may indicate an end to the previous upward trend' said Mr Dyer
Property yields remained stable with the New Zealand portfolio achieving 2.4% for the quarter. AMP Henderson's long-term view of property continues to be favourable if adequate diversification is achieved
Recently AMP Henderson included an exposure to global property in its balanced funds.
'Global property vehicles are now available to New Zealand investors. The attractive pricing of these assets and the reduction in risk that they bring to investors' portfolios makes them attractive' said Mr Dyer.
'Looking ahead, while the June quarter saw a welcome lift in returns across all asset classes, future returns cannot be sustained at these levels. Around the world, average interest rates are between 3% and 3.5%, while in New Zealand they're between 5.5% and 6%. Sharemarkets remain priced to return somewhat higher returns. Our best estimates for long-term share market returns are between 8% and 10%' said Mr Dyer.
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