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Australia looks attractive

Investors fearing a New Zealand slow down are better off going offshore for their investments – particularly before the Kiwi dollar begins its slide – with Australia, Japan and Asian looking increasingly attractive.

Tuesday, March 28th 2006, 6:00AM
Economics New Zealand managing director Donal Curtin, said the slump in business confidence and planned business activity means corporate profits are going to be harder to come by.

“New Zealand’s export prices aren’t going that well. Prices for meat and wool are sliding, particularly on the meat side. In November our overall export prices, in New Zealand dollars, were running some 1.8% lower than a year ago.

“It’s clear that the period ahead of us in not one where corporate profits are going to be as easy to come by as they were over the past two or three years.”

Curtin said Australia looks the better bet for local shares.

“They don’t look to have the looming slowdown that we do; their interest rates are lower, their exchange rate isn’t hurting as much and their mining exports are getting stunning prices.

“Australia will no doubt have its off moments, and its export prices can’t ride on China’s coat-tails forever, but the Aussie equity market has gone on to record highs - so that’s all to the good.”

Northplan managing director Kelvin Syms, said the investment implication is that they are continuing with their plan of underweighting local shares and holding more Australian and international shares instead.

“Australia looks the better bet for local shares. It hasn’t done any harm either that we’ve found a new fund manager of smaller Aussie shares who has been performing well for us,” Syms says.

International shares aren’t looking too bad either.

“Last year our Asian and Japanese funds did very well indeed, and we’re inclined to think that overseas shares generally will come to the party this year – especially as and when the Kiwi dollar starts sliding, as slide it will at some point.

“We’ve been reasonably ahead of the curve in taking evasive action – we have run down the allocations to New Zealand equities (and within that, employed a fund that collects dividend income rather than focussing on capital gains).

“We’ve also been favouring local interest income, and the other major economic event of recent days, the Reserve Bank’s ‘Official Cash Review’ on January 26, confirms us in that positioning.

“Alan Bollard, the Reserve Bank Governor, said that there was no prospect of short-term interest rates coming down in the immediate future, and we think that’s highly likely. With good interest rates on offer, well above inflation even after tax, we’re inclined to take them up while they last,” Syms said.

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BNZ - Green Home Loan top-ups - - - 1.00
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BNZ - Rapid Repay 8.69 - - -
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China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
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Co-operative Bank - Standard 8.40 7.85 7.39 7.25
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
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Heartland Bank - Reverse Mortgage - - - -
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HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
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Kainga Ora 8.64 7.79 7.59 7.29
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.35 7.89 7.65
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Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
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SBS Construction lending for FHB - - - -
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Median 8.64 7.45 7.37 6.79

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