WELLINGTON, April 20 (Reuters) - AMP Capital Investors, New Zealand's biggest fund manager, said it was staying overweight in global equities as it saw improving returns in the first quarter.
AMP's head of investment strategy Jason Wong said equities were currently in a 'sweet spot' because of low inflation pressures allowing central banks to keep interest rates low, while the earnings outlook remained positive.
'It still feels like the cyclical rally in shares has more to go, but we are becoming more alert to potholes in the road ahead,' Wong told a media briefing on Tuesday.
AMP Capital Investors is a unit of Australia's AMP Ltd and manages assets worth around NZ$11 billion ($7.9 billion). The gross return for its benchmark balanced fund for the year to March 31 was up 16.9 percent, compared with the December quarter's 10.6 percent return and a 14 percent loss the year before.
Wong said global recovery looked set to become more self-sustaining, with growth of 4 percent or better expected.
AMP expected to stay overweight in global equities, although it had been inclined to take profits by selling into rallies.
'We're quite relaxed about this year but would be getting more concerned as time goes on,' Wong said.
Risks included possible overheating of the Chinese economy, and fiscal concerns such as have hit Greece.
Bonds were well supported in the near term by low short term rates anchored to loose monetary policy while long dated yields were high, leading to a steep yield curve. But longer term the outlook would not be so cheery.
Domestically, Wong said the Reserve Bank of NZ should likely be raising rates now, but may be waiting for evidence economic recovery has some substance to it, which would mean a June or July start.
'It's going to be a case of (a rise) every meeting from there on...it's going to be a pretty steady upward increase from that point,' he said.
The tightening was likely to be in 25 basis point increments to a neutral level of around 4.75 percent to 5 percent
New Zealand equities are generally well priced and likely to deliver earnings growth of less than 10 percent this year.
AMP's head of NZ equities, Guy Elliffe, said favoured stocks included industrials exposed to global recovery such as resin maker Nuplex Industries and rubber goods maker Skellerup , while health equipment company Fisher & Paykel Healthcare was attractive because it had non-cyclical revenue streams.
There were also stocks offering solid yield of 6 percent or better, which included energy company Contact Energy and casino operator Sky City.
Elliffe said AMP would take a look at possible investment in a proposed fund to finance farmer shareholders in dairy giant Fonterra.
The fund is seen as a indirect way for investors to gain exposure to Fonterra, the world's biggest dairy exporter, without the 10,500 farmer members giving up control. See Separately, the state-operated New Zealand Superannuation Fund reported of 4.3 percent gain on its funds during March, for gross returns since July 1 2009 to 22.3 percent.
The long term sovereign investment fund, which has around NZ$16.6 billion in assets, reported a fall of 22.1 percent for the year to June 2009.
($1=NZ$1.41)
(Reporting by Gyles Beckford;)
((gyles.beckford@reuters.com ; +64 4 471 4231; Reuters
Messaging: gyles.beckford.reuters.com@reuters.net)) Keywords: AMPCAPITAL/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
AMP's head of investment strategy Jason Wong said equities were currently in a 'sweet spot' because of low inflation pressures allowing central banks to keep interest rates low, while the earnings outlook remained positive.
'It still feels like the cyclical rally in shares has more to go, but we are becoming more alert to potholes in the road ahead,' Wong told a media briefing on Tuesday.
AMP Capital Investors is a unit of Australia's AMP Ltd and manages assets worth around NZ$11 billion ($7.9 billion). The gross return for its benchmark balanced fund for the year to March 31 was up 16.9 percent, compared with the December quarter's 10.6 percent return and a 14 percent loss the year before.
Wong said global recovery looked set to become more self-sustaining, with growth of 4 percent or better expected.
AMP expected to stay overweight in global equities, although it had been inclined to take profits by selling into rallies.
'We're quite relaxed about this year but would be getting more concerned as time goes on,' Wong said.
Risks included possible overheating of the Chinese economy, and fiscal concerns such as have hit Greece.
Bonds were well supported in the near term by low short term rates anchored to loose monetary policy while long dated yields were high, leading to a steep yield curve. But longer term the outlook would not be so cheery.
Domestically, Wong said the Reserve Bank of NZ should likely be raising rates now, but may be waiting for evidence economic recovery has some substance to it, which would mean a June or July start.
'It's going to be a case of (a rise) every meeting from there on...it's going to be a pretty steady upward increase from that point,' he said.
The tightening was likely to be in 25 basis point increments to a neutral level of around 4.75 percent to 5 percent
New Zealand equities are generally well priced and likely to deliver earnings growth of less than 10 percent this year.
AMP's head of NZ equities, Guy Elliffe, said favoured stocks included industrials exposed to global recovery such as resin maker Nuplex Industries and rubber goods maker Skellerup , while health equipment company Fisher & Paykel Healthcare was attractive because it had non-cyclical revenue streams.
There were also stocks offering solid yield of 6 percent or better, which included energy company Contact Energy and casino operator Sky City.
Elliffe said AMP would take a look at possible investment in a proposed fund to finance farmer shareholders in dairy giant Fonterra.
The fund is seen as a indirect way for investors to gain exposure to Fonterra, the world's biggest dairy exporter, without the 10,500 farmer members giving up control. See Separately, the state-operated New Zealand Superannuation Fund reported of 4.3 percent gain on its funds during March, for gross returns since July 1 2009 to 22.3 percent.
The long term sovereign investment fund, which has around NZ$16.6 billion in assets, reported a fall of 22.1 percent for the year to June 2009.
($1=NZ$1.41)
(Reporting by Gyles Beckford;)
((gyles.beckford@reuters.com ; +64 4 471 4231; Reuters
Messaging: gyles.beckford.reuters.com@reuters.net)) Keywords: AMPCAPITAL/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.