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Markets fire on all cylinders

14 October 2003

Markets fire on all cylinders

Strong returns in the September quarter capped a great year for investors. In the twelve months to 30 September 2003, AMP Henderson’s Low, Medium and High risk balanced funds returned 9.3%, 11.3% and 18.3% respectively.

The highest returns have been to share funds. Over the past year the MSCI, hedged to the NZ$, returned 24.3%. New Zealand shares have enjoyed similar buoyancy with AMP Henderson’s Strategic Equity Growth fund gaining 20.2% in the year to September.

In the September quarter New Zealand equities achieved a return of 3.7%. Global equities achieved 5.1% on a currency hedged basis and 3.0% unhedged.

‘In late 2002 and early 2003 there were a number of significant threats hanging over the global economy. As those risks have abated, investor confidence has increased. In general the appetite for risk has improved and this has greatly benefited the prices of risky assets’ said Mr Paul Dyer, Chief Investment Officer of AMP Henderson, New Zealand’s largest fund manager.

‘However, it is important to keep these gains in perspective. Markets have rebounded from deeply oversold levels. Returns such as we have enjoyed in the past twelve months are well above sustainable levels’ said Mr Dyer.

Fixed income markets have also enjoyed healthy returns. Over the past year AMP Henderson’s Global Fixed Income fund returned 9.6%. New Zealand Fixed Interest was slightly lower at 8.1%

‘The past year has seen fixed income investors increasingly accept that low interest rates will remain for an extended period. This has been highly beneficial for prices of longer maturity debt. In addition, the growing optimism about growth in most regions has benefited non-sovereign debt in recent months. Spreads between corporate and Government debt have contracted as investors have reassessed downwards their perceived risks of default’ said Mr Dyer.

However, fixed income returns for the September quarter were poorer. The New Zealand fund experienced a small loss as yields rose marginally.

‘As with sharemarkets, this illustrates the need for investors to focus on sustainable returns. New Zealand interest rates are now around 6%, and this is indicative of the future returns from investment grade assets. Returns in this sector have been very strong over the previous three years but this is unlikely to continue’ said Mr Dyer.

Movements in the New Zealand dollar were not a large factor over the past three months.

‘The New Zealand currency has shown a rare period of stability. We continue to see the currency as moderately above its longer run fair valuation. However, this situation may persist for some time. New Zealand interest rates remain well above world levels. In addition, the US dollar shows similar signs of over-valuation. It remains to be seen whether the New Zealand dollar or the US dollar corrects itself first’ said Mr Dyer.

New Zealand property continued its solid performance and delivered 2.4% for the quarter and 10.3% over the past year.

‘We are witnessing increased client interest in property. Having been out of the limelight in recent years, investors are now appreciating the attractive yields and stability of income provided by these assets’ said Mr Dyer.

This is not simply a New Zealand trend. AMP Henderson believes there is a strong case for investment in Global Property Securities and began to offer this unique product to its superannuation clients at the beginning of the quarter. The returns for first quarter were an impressive 7.2%.

‘We believe that global property will increasingly form an important part of an investor’s portfolio as a result of the many diversification benefits it offers’ said Mr Dyer.

Investment returns

To 30 September 2003
Quarter Return To 30 September 2003
Annual Return
Individual Sectors – Before Tax

Strategic Equity Growth
NZ Equities Active
Global Equities Active
New Zealand Fixed Interest
Global Fixed Interest


Managed Funds – Before Tax

Low Risk Fund
Medium Risk Fund
High Risk Fund


Passive Funds – Before Tax

Global Equities – Passive
Global Equities – Passive Hedged
NZ Equities – Passive


Index Performance

MSCI Gross Index
MSCI Gross Hedged Index
NZSX50/NZSE 40 (composite)
NZSX Portfolio Composite Index
CSFB Bills Gross Index
CSFB Bond Index
Global Bond Index (Lehman)



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