Bearish sentiment about stockmarket all wrong long term - AMP

By NZPA

Tuesday 23rd July 2002

A poor performance by global equities took the gloss off AMP Henderson Global Investors' managed fund results in the three months ending June.

Global equities was the worst performing sector during the quarter, with active funds falling 12.5 percent and passive funds 18.3 percent, as accounting scandals and negative earnings reports soured sentiment.

For the June year, they fell 24.6 percent and 31.3 percent respectively.

But AMP, New Zealand's largest fund manager, is taking a long-term optimistic view of shares, saying that the current bear market is ignoring an upturn in economic indicators.

"After experiencing tough conditions at the end of 2000 and a major economic slump in 2001, most global economic indicators are now positive," said AMP Henderson's chief investment officer, Chris Wozniak.

"There have been two consecutive quarters of economic growth in most OECD countries, while global industrial and business confidence is up."

Interest rates were lower, fiscal expansion was stronger and equities were now earning better returns than bonds, Mr Wozniak said.

Fixed interest and property investments offered the best returns in the June quarter. The best performing sector was global fixed interest with a 3.9 percent return before tax, followed by New Zealand fixed interest on 2.9 percent and property on 1.9 percent.

New Zealand active equities fell 1.4 percent for the quarter but grew 1.3 percent for the year. Local passive equities grew 0.4 percent over the quarter and 4.7 percent for the year.

AMP said the rapid appreciation of the New Zealand dollar was partly to blame for the lower returns from offshore investments, although currency hedging had limited the company's exposure to negative returns.

The unhedged passive global equities returned a negative 18.3 percent for the quarter against negative 12.1 percent for the hedged fund. For the year unhedged global equities declined 31.3 percent while hedged equities lost 17.7 percent.

Looking at the bigger picture, AMP Henderson said a strong recovery in equities was in the wind, but it could take up to 10 years to be realised on an annualised basis.

"We're heading back to a more normal investing world -- the question is how long will it take to get there?" Mr Wozniak said.

"A relatively few companies are tending to dominate people's perceptions of what's happening to Corporate America. But Corporate America is doing just fine."

However, investors had to accept that the days of double digit returns from equities were over and returns were likely to be in the seven to nine percent range, rather than the previous 11 to 14 percent.

Managed funds -- (percentage change, excluding tax)

June qtr / June year

Low risk fund -1.1 / 0.0

Medium risk fund -5.6 / -8.5

High risk fund -9.3 / -14.5

Individual sectors - (percentage change, excluding tax)

NZ fixed interest +2.5 / +7.2

Global fixed interest +3.9 / +8.8

Cash +1.4 / +5.6

Property +1.9 / +9.8

Strategic equity growth -2.8 / +4.8

NZ equities active -1.4 / +1.3

Global equities active -12.5 / -24.6

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