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Colonial First State Reports |
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NZ & Oz Sharemarkets do double-digit returns
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| The New Zealand sharemarket defied its critics to deliver another year of double-digit returns, as support from strong global markets and corporate activity more than offset the challenges from a domestic economy characterised by rising costs. For the year to March 2007, the Trustees’ benchmark was 16% and the 3-year benchmark was 20.7%. Relative to this benchmark, the Australasian Share Fund has delivered pleasing results over one and three year periods, returning healthy gains of 17% and 24.3% respectively. However, it has underperformed over a five-year period. Over one and three years, the Fund has benefited significantly from its exposure to a strong Australian sharemarket. Over the last 12 months, the share prices of infrastructure companies Macquarie Infrastructure Group and Babcock and Brown Infrastructure Group have risen, as investors responded positively to asset sales and acquisitions respectively. In addition, Foster’s Group has delivered outperformance due to its prospect as a takeover target. Over a three-year period, holdings in bank stocks like ANZ have generated outperformance due to strong domestic economic conditions, while resource stocks like BHP Billiton have performed well as continued global economic growth increases demand for commodities. Exposure to Patrick Corp was also beneficial as a result of its takeover by Toll Holdings.
Underperformance over a five-year period is the result of both the Fund’s investment style and individual stock selection decisions. The Fund’s growth philosophy underperformed early in the period relative to a value approach, while poor performance from Tranz Rail shares prior to the company’s sale to Toll Holdings in 2003 also detracted from fund performance. Looking ahead, expectations are for the Australian sharemarket to continue to outperform its New Zealand counterpart. The Australian market is likely to benefit from both solid domestic conditions and firm global growth, in Asia in particular. In addition, the recent explosion in corporate activity is showing no signs of a slowdown, and should deliver further gains. Australian corporates positioned to take advantage of these developments should experience earnings growth. In New Zealand, returns are expected to be more modest as high interest rates and a strong NZ dollar offset the gains from a resilient domestic economy and continued growth in the global economy. |
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