Fund manager still sees value after 13% September quarter surge

BUSINESSDESK: AMP Capital Investors (NZ), which manages $16 billion in local funds, still sees value in the local stockmarket, which beat its global peers to rise 13% in the September quarter.

New Zealand stocks, including imputation credits, were the best-performing asset in the three months ended September 30 after solid earnings growth, and "still have a way to go before valuations become a restraining factor", head of investment strategy Keith Poore told reporters at a quarterly media briefing.

Risk-sensitive assets such as stocks and property were bolstered by the strong policy support undertaken by central banks around the world, which ate into the real returns offered by bonds.

"Policy support lifted all boats, but New Zealand equities did particularly well," Mr Poore says. "Despite the rally we've seen, valuations in equity markets relative to bonds are still favourable."

AMP Capital's diversified growth fund reaped the biggest gain in the quarter at 6.4% before fees and tax, followed by a 5.6% quarterly return in its responsible balanced fund. The balance fund made a return of 4.8% in the September quarter and the conservative fund rose 2.8%.

The fund manager's New Zealand strategic shares reported the biggest gain across the sector funds at 16.2%, followed by New Zealand shares (average), up 15.8% and NZ shares active, rising 15.4%.

Australian shares rose 7.8% in the quarter, hedged global shares gained 7% and property advanced 6.5%.  AMP Capital's global property rose 4.3% in the quarter, unhedged global shares advanced 3.3% and global fixed interest gained 1.6%.

New Zealand fixed interest rose 1.4% in the quarter and cash increased 0.9%.

Mr Poore says the fund manager increased its hedging programme ahead of the announcement of the Federal Reserve's third round of quantitative easing in September. He expects the kiwi will probably stay above 80 US cents if the Fed keeps the greenback weak by printing money to buy assets.

AMP Capital chief economist Bevan Graham dismissed the need for New Zealand to embark on its own quantitative easing programme as advocated by some manufacturers and opposition political parties, saying the Reserve Bank still has 2.5 percentage points to play with in the official cash rate.

"The quantitative easing experiment is only about halfway through – at some point QE needs to be exited from" and it success or failure can't be judged until then, he says.