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AMP Capital still sees value in local stocks

Monday 15th October 2012

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AMP Capital Investors (New Zealand), which manages $16 billion in local funds, still sees value in the local stock market, which beat its global peers to rise 13 percent in the September quarter.

New Zealand stocks, including imputation credits, were the best-performing asset in the three months ended Sept. 30 after solid earnings growth, and "still have a way to go before valuations become a restraining factor," head of investment strategy Keith Poore told reporters at a quarterly media briefing.

Risk-sensitive assets such as stocks and property were bolstered by the strong policy support undertaken by central banks around the world, which ate into the real returns offered by bonds.

"Policy support lifted all boats, but NZ equities did particularly well," Poore said. "Despite the rally that we've seen, valuations in equity markets relative to bonds are still favourable."

AMP Capital's diversified growth fund reaped the biggest gain in the quarter at 6.4 percent before fees and tax, followed by a 5.6 percent quarterly return in its responsible balanced fund. The balance fund made a return of 4.8 percent in the September quarter, and the conservative fund rose 2.8 percent.

The fund manager's New Zealand strategic shares reported the biggest gain across the sector funds at 16.2 percent, followed by NZ shares (average) up 15.8 percent, and NZ shares active, rising 15.4 percent.

Australian shares rose 7.8 percent in the quarter, hedged global shares gained 7 percent and property advanced 6.5 percent. AMP Capital's global property rose 4.3 percent in the quarter, unhedged global shares advanced 3.3 percent, and global fixed interest gained 1.6 percent. New Zealand fixed interest rose 1.4 percent in the quarter, and cash increased 0.9 percent.

Poor said the fund manager increased its hedging programme ahead of the announcement of the Federal Reserve's third round of quantitative easing in September. He expects the kiwi will probably stay above 80 US cents if the Fed keeps the greenback weak by printing money to buy assets.

AMP Capital chief economist Bevan Graham dismissed the need for New Zealand to embark on its own quantitative easing programme as advocated by some manufacturers and opposition political parties, saying the Reserve Bank still has 2.5 percentage points to play with in the official cash rate.

"The quantitative easing experiment is only about half-way through - at some point QE needs to be exited from" and it success or failure can't be judged until then, he said.

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