AMP reduces NZ share exposure as economy slows

By NZPA

Friday 15th July 2005

AMP Capital Investors said today it will continue to pare back its New Zealand equity investments as warning signs of a slowdown in the economy intensify.

AMP is the country's biggest fund manager, with over $10 billion invested.

Tore Hayward, AMP's chief investment officer, said that while the local sharemarket performed well in the June quarter, current valuations don't reflect the slowing economy and severe capacity constraints.

The headline NZSX-50 gross index has piled on some 15% in the past eight weeks, on the back of takeover and merger activity, to trade at fresh all time highs around 3330.

AMP has ridden the wave, with its New Zealand Equities Strategic Fund returning 6.12% for the June quarter and 22.41% for the June year.

"Overall it was a strong quarter for the New Zealand sharemarket, for property and for bonds," Hayward said.

"In a quarter where oil hit $US60 a barrel, and there were signs of slowing economic growth - globally, and in New Zealand - the markets proved to be resilient."

But the latest string of poor economic data - including a weak GDP number, declining business confidence and a fall in retail sales, means AMP plans to lessen its exposure to the local market - a process that began in the March quarter.

The fund manager will shift 2% of its asset allocation from the New Zealand market into global shares.

Hayward said AMP expects the New Zealand economy to underperform in the coming quarter, but is loath to use the word "recession".

AMP also plans to increase its exposure to the local property market - largely through unlisted commercial property investments, to take advantage of strong rents.

It will shift 5% of its investments from global to local bonds; 1% from global listed property to global equities; and reduce its hedging as the New Zealand dollar trends down.

AMP's low, medium and high equity diversified funds returned 3.33%, 4.02% and 4.74% respectively during the June quarter. For the year to June 30 they returned 10.06%, 11.14% and 14.56%.

Global property returned 12.10% for the quarter and 39.08% for the year, while its New Zealand Property Fund returned 5.06% and 15.36% respectively.

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