Wednesday 20th July 2011
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The global outlook for shares over the next year is good, despite a "wall of worry" keeping returns volatile in the short term, says New Zealand's biggest fund manager, AMP Capital Investors.
AMP said it was going modestly overweight on global shares and property and underweight global fixed income assets, as its benchmark balanced fund reported slender growth of 0.3 percent for the three months to June. "The global recovery is continuing, but as is often the case after a financial crisis it's a very fragile and messy recovery," said Shane Oliver, director of investment strategy at AMP Capital based in Sydney.
AMP said it was overweight on New Zealand fixed interest assets and underweight on shares, as it picked New Zealand interest rates to start rising from as soon as September in the face of growing inflation pressures.
The New Zealand dollar was overvalued based on its fundamentals but is likely to continue to appreciate because of the expectation of a more hawkish central bank, Oliver said.
"The odds on the kiwi reaching parity [with the US dollar] at some point are still attractive," Oliver said, expecting strong demand for the country's key commodity exports, coupled with weakness in the US dollar and euro, to support the currency.
Global growth is likely to be supported by a low interest rate environment, with the Reserve Bank of New Zealand potentially the next central bank in the developed world to raise rates, he said.
The economy looks set to gather pace from the second half of the year, with a range of labour market, housing and credit data pointing to ongoing inflation pressures, after Monday's second quarter figures surprised on the upside.
A clearer indication of the RBNZ intentions may come at its next policy meeting on July 28. A Reuters poll has seen expectations shift from early 2012 to late 2011 for a rate rise, as the strong inflation data backed up strong growth data from last week.
AMP Capital Investors, a unit of Australia's AMP, manages assets worth around $11 billion.
Amongst its other diversified funds the conservative fund returned 1.5 percent for the quarter while the growth fund shrunk 1 percent on the tough quarter for equity markets.
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