Of Bulls & Bears

Friday 9th February 2001

NZ Fund emigrates to Australia

While members of the New Zealand Stock Exchange earnestly debate whether to merge with the Australian Stock Exchange or remain independent, the rest of the world is voting with its feet. Global investment banks and brokers can't move their head office functions to Sydney fast enough while institutional investors have long treated the two markets as indivisible. The latest move has come from Capstone New Zealand Fund - the US' only New Zealand-specific managed fund. Shareholders were due to meet yesterday in Texas to vote on a change of name and investment policies. The new fund is to be called the Commonwealth Australia/New Zealand Fund and assets will be invested on both sides of the Tasman. "Investing in Australia benefits the fund, offering greater diversification while reducing the overall risk of the fund without limiting returns," a document to shareholders says. "The board and the investment advisor believe that having the opportunity to invest in Australia will boost our overall fund performance."

Optimists push up Advantage price

Advantage Group replied in the negative when asked by the Stock Exchange market surveillance panel if it knew why its share price had jumped from $1.08 at close on Friday, January 19, to $1.30 during trading on the following Monday. Since then, the shares have continued to rise, reaching $1.47 during trading on Wednesday. That's a gain of 36% in three weeks. Ferdinand knows the share prices of technology shares are notoriously volatile, but Advantage's price has been moving much more vigorously than others in the sector, both here and overseas. Presumably, investors are punting on Advantage turning in a strong interim result, due out this month. This is despite an earnings warning by chief executive Greg Cross in December when announcing the group's very good first quarter result. "As a result of the continuing change in market climate and the softening in the New Zealand economy, the outlook for [the second quarter] is not as strong and we are revising our revenue forecast for the full year," he said. All should be revealed in the next few weeks.

TeNZ sends mixed signals

Investors in indexed funds like the listed TeNZ fund (which invests in the market's top 10 shares) are learning there are cons as well as pros to the concept. Indexed funds, which buy shares to match the weightings used for companies in a given index and charge low fees to reflect the lack of management required. This is good for investors when indices are going up, but less so on the other side of the slope. The Stock Exchange's TeNZ fund went from $1.01 at the beginning of last year to 81c at the end, a decline of nearly 20%. This was mainly thanks to the overwhelming dominance of Telecom whose share price slumped last year. Although TeNZ has recovered some of that loss this year, most investors are still well down on their investment. According to the fund's latest notice, dated February 1, its net tangible asset backing per share is 89.6c. This is higher than the company's share price, which might be a signal for bargain hunters ... or a signal of the market's expectation of the future.

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