By Rob Hosking
Friday 31st January 2003
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Although the annual figure revealed the kind of red ink investors have come to expect passive global equities posted a massive 36.3% decline and hedged global equities were down 18.8% the quarterly picture shows glimmerings of a turnaround.
Global hedge equities performed better than any other area, with a 11.8% rise and the decline in passive global equities slowed to 4.4%.
Much of the difference between the two was caused by the rise in the New Zealand dollar exchange rate, chief investment officer Paul Dyer said.
Overall, the global investment situation was returning to something like normal, after three years of turmoil, Mr Dyer said.
An annual return over between 6-7% after inflation was expected and that was in line with the long-term return on equities, he said.
"There don't seem to be any outstandingly cheap asset classes at the moment," he said. "New Zealand equities may be slightly under-priced. But fixed-interest markets are, if anything looking slightly too expensive."
On the local economic scene, he echoed Reserve Bank governor Alan Bollard's view of the recent exchange-rate rise that, too, was simply returning to normal, he said.
"The New Zealand dollar is no longer undervalued, that's all," Mr Dyer said.
And global markets now appear to be settling down aided, in part, by the increased financial integration around the world. "Equity markets are now much more closely correlated. That means the returns are becoming more similar."
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