NZ shares boost AMP Capital

The New Zealand economy's recent "stronger for longer" performance saw AMP Capital's local equities funds make robust returns in the September quarter but the party could be winding down, the company said.

AMP Capital today reported its Strategic Equity Growth Fund Made an 8.1 per cent return in the three months to September while its NZ Equities Active fund returned 5.8 per cent. For the 12 months to September the funds returned 26.5 per cent and 25.2 per cent respectively.

AMP Capital chief investment officer Tore Hayward said the "stronger for longer" local economy had seen a "terrific outperformance of the New Zealand sharemarket" compared to those overseas.

The local market had been underpinned by strong corporate balance sheets, better management and attractive dividend yields, Mr Hayward told a briefing in Wellington today.

By contrast, the company's Global Equities Passive Unhedged Fund lost 7.6 per cent over the quarter, a result affected by the New Zealand dollar's recent rise. On a hedged basis, global equities performed better with the MSCI Gross Index Hedged returning a negative 0.3 per cent -- better but not even close to the strong performance of New Zealand equities.

"This shows the impact of New Zealand's high dollar and surprisingly robust economy against a backdrop of a moderating outlook for global growth," Mr Hayward said.

But Mr Hayward said New Zealand's economic conditions were probably "as good as it gets" and the economy was probably peaking with long term growth likely to be curbed capacity constraints and low unemployment.

AMP Capital was considering "whether we should be positioning for a slower New Zealand economy ahead."

"We are keeping a watching brief on the relative merits of investing in New Zealand shares compared with global shares, although we haven't reached a trigger point yet."

However Mr Hayward said AMP had already begun to position itself for a slowing local economy by shifting 5 per cent of its diversified portfolios from global bonds to New Zealand bonds.

The company's next step would likely be to reduce its currency hedging. But while AMP Capital believed the New Zealand dollar was currently overvalued by as much as 19 per cent against a basket of other currencies, it appeared to still be in an uptrend.

"We would want to see a decisive downtrend before under-hedging," AMP Capital fixed interest strategist Leo Krippner told the briefing.

In the short term Mr Krippner expected the kiwi to continue its recent gains and peak above its high against the US dollar early this year of almost US71c.

Meanwhile, Mr Hayward also said AMP Capital's decision to invest in global property just over a year ago had paid off with the sector returning 9.8 per cent for the September quarter and 36.3 per cent for the September year on a hedged basis.

AMP Capital's flagship low, medium and high risk funds returned 1.9 per cent, 1.2 per cent and 1.3 per cent for the September quarter and 8.9 per cent, 11.8 per cent and 17.6 per cent respectively for the 12 months to September.

- NZPA