AMP Capital in profit-taking mode on NZ equities

Tuesday 20th April 2010

AMP Capital Investors plans to sell down its stake in equities as the pace of stock-market gains slows this year.

The investment company, which manages $11 billion of assets in New Zealand, expects returns of less than 10% on the New Zealand stock market this year, less than half last year’s gain, and a third of what they’re forecasting in global equities, according to Jason Wong, head of investment strategy.

The firm’s investment team is letting its higher-yielding, riskier shareholdings move back towards a benchmark weight of 50% after buying up large during the first three months of 2009, the time the local equity market troughed.

“We’re allowing our equity weightings to drive down a little bit and have a natural bias to sell on rallies, (rather) than look to buy,” Wong told a media briefing in Wellington today.

“We’re looking for opportunities to take profit.” The first quarter of 2010 was the first period for AMP Capital Investors that weren’t hit by New Zealand’s worst recession in 18 years, and its latest results came from a low base when stock markets around the world plunged following the global credit crunch.

The fund manager made a 2.7% return on New Zealand equities in the three months ended March 31, while hedged global equities made a 3.9% gain, and unhedged rose 5%.

International property was the stand-out performer, rising 5.8% in the quarter, while New Zealand direct property sank 13%.

New Zealand fixed interest investments returned 2.5% in the period, and global fixed interest increased 2.6%. Wong said New Zealand’s economic outlook was reasonably rosy this year, with consumer demand showing signs of improving, though he was less optimistic about next year.

AMP Capital Investors’ investment team still expect the Reserve Bank will begin to hike interest rates in either June or July, and Wong said he predicts Governor Alan Bollard will hike 25 basis points initially, holding a 50 point hike up his sleeve if stronger inflationary pressures emerged.

The consumer price index rose 0.4% in the first quarter this year, below market expectations of a 0.6% increase and above the central bank’s 0.3% forecast.

Investors are betting Bollard will boost the official cash rate 155 basis points over the next 12 months, according to the Overnight Index Swap curve, down from 162 points before the CPI data was released.

AMP’s head of equities Guy Elliffe said he expects to see some corporate activity before the end of the year, though he was surprised by the light volume of capital raisings this year. Some $783 million worth of debt and $322 million worth of equity has been raised on the NZX this year.

Businesswire.co.nz

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