AMP Capital takes a knock from direct property investment

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New Zealand property investment was the only asset class to take a knock in the three months through September, according to AMP Capital Investors as the global economy continued to rebound from the brink of collapse late last year.

Wednesday, October 21st 2009, 5:13AM

The fund manager said the majority of leading indicators were pointing to a V-shape recovery amid a remarkable easing in financial market conditions where short-term funding had fallen below the average cost. The pick-up in global sentiment underpinned the gains in AMP Capital's funds, which were led by offshore property and hedged global shares, which gained 36.9% and 21% respectively.

"We are at the early stages of an economic recovery and interest rates remain low - that's normally a good combination for share markets," said Jason Wong, head of investment strategy.

Though New Zealand stocks' price-to-earnings ratio was on the expensive side when compared to the rest of the world, Wong expects them to lag behind the global rally and AMP Capital is slightly overweight on the assets.

The fund manager's balanced fund climbed 6.6% in the three months through September, and has gained 7.6% this year, while its conservative fund gained 3.5% in the quarter and 4% this year. Its growth fund surged 9.5% in the three month period, and has gained 10.4% this year.

Direct investment in New Zealand property sank 9.1% in the quarter, taking the year-to-date decline to 17.4%, in the only weaker asset class in the period.

Wong said they were comfortable with their holdings, as the housing market is bubbling and residential construction is likely to climb as net migration and cheap funding for mortgages encourage people into property.

AMP Capital predicts Reserve Bank Governor Alan Bollard will be forced to boost rates earlier than expected, and forecasts a rate hike in March. Any earlier would not be credible, Wong said, and he expects Bollard to keep the official cash rate at 2.5% when it is reviewed next week.

The fund manager was overweight in global shares, New Zealand shares and NZ property, and underweight in cash, NZ and global fixed interest and global property.

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