NZ’s Tower bullish on domestic economy, shares

Tuesday, 26 July 2011 00:01 - - {{hitsCtrl.values.hits}}

WELLINGTON, (Reuters) : New Zealand’s economy is set for a period of strong growth, which will drive solid gains for the country’s equity market, fund manager and insurer Tower Ltd said on Monday.

The mid-sized firm manager said a lift in inflation pressures was looming and that would make equities more attractive and diminish the appeal of fixed interest investments.

“Fundamentally inflation is the big long-term [global] problem,” Sam Stubbs, Chief Executive of Tower’s investment arm, told a quarterly media briefing.

“We think investors should be looking at inflation-hedged assets, which are typically shares in high quality companies, and also commercial and retail property.”

Tower also said the relatively low value of the New Zealand dollar against neighbouring Australia , which is New Zealand’s biggest export market is a further positive for many listed companies.

Conversely the kiwi’s strength against the U.S. dollar reflected strong prices for New Zealand commodities and also reduced the cost of raw materials.

Tower, which is also New Zealand’s second largest health insurer, has about NZ$4 billion ($3.4 billion) in funds under management.

Stubbs said roughly half of their funds was invested in New Zealand stocks because Tower was bullish on the long-term outlook for the economy, and because of the rapid growth of the state-sponsored retirement scheme Kiwisaver, which is providing a fast growing pool of capital for local companies.

“We’re getting swamped with news about how high commodity prices are, but what is happening is our economy is diversifying much faster than people realise,” Stubbs said, citing industries such as film-making.

On the commodity side, which still dominates the domestic economy, New Zealand is in the right place at the right time to benefit from exposure to the high growth Asian economies, which will provide returns for many years ahead.

“There is a lot of noise and some tough times now but we could be coming to the start of a period of prosperity which could surprise us on the upside,” Stubbs said.

Forecasts from the Reserve Bank of New Zealand show growth is expected to pick up from 1.5 percent in the year to March 2011 to 2.5 percent in 2012 and 4.6 percent in 2013.

New Zealand has had one of the world’s best performing stock markets this year, reflecting expectations of the lift in activity. For more see

Last week AMP Capital investors, New Zealand’s largest fund manager, said it was overweight global shares and property and underweight in fixed income assets.