AMP attracted to global equity play across the board

AMP is putting more money than usual into global equities, because international share values look ‘‘attractive across the board’’, especially against government bonds.

After two years of what AMP called reasonably healthy returns, 2011 was challenging for sharemarkets, but a strong December quarter recovered some earlier losses. New Zealand shares were arguably cheaper than some other markets because of depressed profits and lower share valuations, AMP says, with the prospect of rebound in cyclical sectors, such as home-building.

And, as government bond interest rates fell, the gap between those returns and the yield on shares had widened, making New Zealand’s shares pretty attractive, AMP Capital chief investment officer Guy Elliffe said.

Firm evidence already existed of recovery in demand for new homes, especially in Auckland, with Christchurch’s rebuilding likely to give the sector a huge boost, when work finally got under way after the quakes. ‘‘So it looks pretty interesting, but Fletcher Building is up 15 per cent to 20 per cent in the last few weeks. The market is not unaware of the positives,’’ Elliffe said.

Good demand was also expected for shares in state-owned power companies, with Mighty River expected to float in the third quarter. The Government was expected to sell up to 49 per cent of Mighty River Power and Genesis in each float. Because fellow state-owned power group Meridian was a much bigger company, there might be a smaller portion sold to the market initially, possibly in two smaller tranches.

There was talk also that the Government would offer an incentive to New Zealand shareholders by giving a bonus share for, say, every 10 shares held for one or two years.

AMP’S strong preference was to have both retail ‘‘mum-and-dad’’ investors to be treated the same as institutions, because they were investing on behalf of the same mums and dads. ‘‘We would not want to see a differential process, where retail investors were unfairly advantaged,’’ Elliffe said, for example with a cheaper share price.

For 2012, AMP expected international equities to outperform bonds.