AMP's picks for 2004
AMP Capital's chief investment officer Paul Dyer gives his take on the year ahead.
Wednesday, February 4th 2004, 2:50AM
by Rob Hosking
Last year saw world equity markets return to a form not seen since the mid to late 1990s. AMP itself saw all its asset sectors return firmly to the black, with global equities – passive hedged – return a bumper 43.8% gross. Locally, both the passive and strategic equity sectors performed highly, at 26.3% and 29% respectively.
"We expect 2004 to be very very different," he said.
AMP has shifted its local investments to a more defensive stance. Equity analyst Stan Wilson said.
He cited several local stocks as being good opportunities. Heading the list is Telecom: "they have good cashflow and dividend prospects and they have managed to absorb the impact of paying a stupid price for offshore investments."
Contact Energy is also seen as being promising, and AMP has just "taken a small position" in Trustpower.
He is far less keen on one other large local stock – Air New Zealand. While Air New Zealand has benefited from the high dollar – it has reduced fuel costs and the costs of servicing the company’s debt – the stock is over-valued at current price.
"There’s been an element of ‘mum and dad’ investors buying into it. But when you look around the world there aren’t any people making money out of airlines."
After the last year’s bumper crop of returns, and the fact that more money is pouring into the New Zealand sharemarket as investor confidence returns, there are much fewer opportunities on the local market, Dyer says.
The soaring New Zealand dollar has also had its impact on AMP’s investment strategy, says Dyer.
The company has removed almost all its currency hedging – something the company has done since 2001, Dyer says.
"We believe the New Zealand dollar is pretty close to peaking and that it can’t stay at its current levels for very long," he says.
Over the long run the New Zealand dollar’s optimal level is between 54 and 60 on the trade-weighted index, he says, and at present it is running at about 16% higher than that.
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Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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