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Source: ONE News -
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AMP Capital Investors thinks the odds are building for an earlier tightening than the Reserve Bank of New Zealand (RBNZ) is currently signalling.
The institutional investor expects the NZ dollar to rise further and believes the equity market rally has life in it yet, though AMP itself is currently over weight in global equities.
AMP Capital Investors shared its view while reporting September quarter returns that were amongst the strongest in the last decade.
Its balanced fund returned 6.6% for the quarter, its growth fund returned 9.5%, the conservative fund returned 3.4% and the cash fund returned 1%.
"While New Zealand equities remain good value relative to cash and bonds, the New Zealand market is likely to continue to lag any positive run in global equities," Jason Wong, head of investment strategy at AMP Capital Investors, says.
He expects the RBNZ to hold rates at 2.5% at its review next Thursday but expects a change in rhetoric, arguing the central bank would have a credibility issue if it continues to suggest rates could fall.
The RBNZ has said in recent statements that it expects to keep the official cash rate at or below the current level through until the latter part of 2010.
Wong expects the central bank to indicate it is in no hurry to tighten rates and get rid of any references to possible reductions.
The Reserve Bank of Australia took the first step to returning interest rates toward more normal levels earlier this month, when it lifted the cash rate to 3.25% from 3%.
AMP Capital Investors is forecasting the first rise in the official cash rate here will be in March next year.
The NZ dollar rose as high as US75.75c on Tuesday. Wong says "70 could be the new 60" for the NZ dollar.
"The US dollar has a lot of things going against it," he says.
Wong says his Australian colleagues believe parity is in reach for the Australian dollar against the greenback.
"If that happened then clearly we are going above US80c," he says.
A breakdown of the performance of different asset classes before fees and tax in the third quarter by AMP Capital investors showed hedged global shares rose 21% and global property rose 36.9%. The only asset class to decline in the quarter was New Zealand property.
