Mixed earning season expected before rebound

Wednesday 9th February 2011

The New Zealand corporate earnings season just getting under way will be "okay", according to investment heavyweight AMP Capital Investors.

Corporate earnings were at an inflection point, according to the fund manger's head of equities, Guy Elliffe.

Like the wider economy, earnings will be mixed and outlook statements will be cautious but there will be a rebound in earnings in 2011 and by 2012 companies may be producing double-digit earnings growth.

The rebound in earnings will drive the equity market, which in a year's time could be 10% higher than it is now. AMP Capital Investors sees scope for the S&P 500 to rise another 8%.

Some companies had got the bad news out of the way before the season begins.

"There is no reason to be overly concerned. We think the season will be okay," Elliffe said.

AMP Capital Investors is mildly underweight in New Zealand shares and prefers to invest in global shares at the moment because they are still undervalued.

The fund manager closed its underweight position in the NZ dollar during the quarter ended December 31 because it sees no significant downside risk in the short-term. It expects the NZ dollar to trade in a range between US74c and US80c as the positive influence of commodity prices is countered by a cautious stance by the Reserve Bank of New Zealand.

AMP Capital's conservative fund returned 1.27% for the quarter ended December 31 and 6.67% for the year. Its balanced fund returned 3.46% for the quarter and 7.18% for the year and its growth fund returned 5.87% and 7.69% respectively. The balanced responsible investment fund returned 3.28% for the quarter and 8.47% for the year.

The hedged global equities fund returned 10.29% for the quarter and 13.48% for the year; unhedged global equities returned 1.80% and 3.26% respectively; and New Zealand equities average return was 4.78% for the quarter and 6.24% for the year.

Global property returns remained strong at 8.87% for the quarter and 23.79% for the year.

NZPA

Comments from our readers

No comments yet