AMP shares set to slide: broker

By Geoff Senescall

AMP shares are likely to fall after the final deadline for their inclusion in Australia's All-Ordinaries Index passes on January 1, says broker Ord Minnett.

Without the support of index-buying, AMP shares, trading at $A20.15 ($23.60) when the market closed yesterday, are expected to fall back to a price within what Ord Minnett sees as a fair valuation range - $A15 to $A19.

Because institutional investors got very little stock when AMP was listed this year, the Australian exchange added AMP to the bench-mark index gradually, to allow institutions time to build up shareholdings in the stock without putting too much upward pressure on the share price.

On August 1, 25 per cent of the shares were added to the index, then 50 per cent on October 1 before the 100 per cent will be reached on New Year's Day.

On each of those earlier occasions the share price rose in the leadup to the indexing deadline, then tailed off afterwards before rallying again.

This also happened in September when Morgan Stanley decided to include AMP in its MSCI index.

Ord Minnett's Arthur Lim said the difference this time was that the process would be completed and institutions should have their full indexing quotas.

"We believe that the AMP share price has been trading well above valuation due to indexing support since its listing in June."

After the initial listing exuberance, the share price had been as high as $A22.50.

If any shareholders intended selling AMP shares, time was running out, said Mr Lim. Likewise anyone who wanted to buy should wait until next month.

While there might be some further weakness in AMP, Mr Lim believed it was still a good company in which to invest.

"AMP should be in any portfolio, given its status as one of the top financial services companies in Australia," he said. With corporate activity rife in the financial services sector, AMP was also a good bet.

Mr Lim said there were still around 170,000 New Zealanders holding AMP shares.

At the time of the float that figure was around 273,000.